Mideast POP demand stays weak; offers from Europe, Korea lower than China

Author: Prateek Pillai

2020/06/10

SINGAPORE (ICIS)--Demand for 10.0-13.5% polyether polyols in the Middle East is expected to stay weak even with lower-priced cargoes available from Europe and South Korea.

In the week ended 4 June, spot prices for drummed cargoes were unchanged week on week at $1,240/tonne CFR (cost & freight) GCC (Gulf Cooperation Council), according to ICIS data.

Prices had been falling in the previous weeks mostly as a result of weak demand and given availability of attractive offers from Europe and South Korea since the second half of May.

Offers for European and Korean cargoes over the past two weeks were at $1,200-$1,280/tonne CFR GCC.

Offers from China were higher at around $1,400-$1,450/tonne CFR GCC, as Chinese producers have had to deal with gains in feedstock propylene oxide (PO) as well as increased demand in their domestic market.

Consequently, most traders and buyers in the Middle East local traders were shunning China-sourced POP for European or Korean alternatives.

Demand for POP in the Middle East has remained weak with limited orders for downstream products and a fall in industrial activity due to a combination of lockdown restrictions and the traditional demand lull during the Muslim fasting month of Ramadan (23 April – 23 May).

Additionally, most POP-based products require isocyanates as input materials for their production and demand for isocyanates in the Middle East also remains weak, further depressing the POP market.

This weak demand along with a supply glut caused by the influx of attractively priced European cargoes has depressed prices, as European producers look to offload their unsold inventories overseas.

The situation in China however, is different with lockdown restrictions getting lifted and economic activity resuming to pre-coronavirus levels.

This has resulted in Chinese downstream demand for POP-based products such as flexible foams, which are used in mattresses, pillows, sofas, car seating and shoe soles to pick up.

There is a possibility that the strong Chinese market would also draw arbitrage trade flows from Europe and South Korea.

POP is a key component in the production of polyurethane foams. These flexible foams are primarily used in cushioning applications such as furniture, car seats, bedding, and carpet underlays.

Focus article by Prateek Pillai

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