Mideast chemicals supply tight amid US outages, strong China demand

Author: Felicia Loo


SINGAPORE (ICIS)--Supply tightness prevails in the Middle East chemicals markets and it remains a challenge to scour the region for cargoes amid winter storm-related outages in the US and strong demand coming from China.

The ramifications are felt keenly in the polymer markets.

For both polyethylene (PE) and polypropylene (PP), selling sentiment is strong on expectations that demand from the US and Latin American buyers will surge, which would affect the Middle East’s allocations to other regions.

Market sentiment has firmed on expectations of tighter supply conditions emerging in March as strong deep-sea demand on account of US outages coincides with pre-Ramadan restocking taking place within the Middle East.

The Muslim fasting month of Ramadan begins on 12 April.

Sellers in the Middle East are also optimistic on improved uptake from China after the country’s week-long Lunar New Year holiday on 11-17 February.

"I see prices continue to skyrocket and in China, things are more bullish than expected," said ICIS senior consultant Fabrizio Galie.

Seasonal shutdowns of manufacturing plants in China had been shorter compared with the previous years, with some production not interrupted, as people scaled back on travels during the Lunar New Year holiday amid the pandemic.

Chinese downstream exports of plastic products are being pushed by demand in the west, said Galie, citing that supply was already very tight in Europe and global market conditions were aggravated by the US outages.

"Presumably there will be much demand for Middle Eastern cargoes. Then moving to April, we’ll have the Ramadan and normally business slows, volumes could pile up at ports even with high demand abroad," Galié opined.

The situation could last until June, he said.

"Overall, US will improve now but supply remains tight versus demand in the next few months," he evinced.

Polymer producers in the Middle East are expected to announce their March offers in the week, after some delays.

"We all know there is an increase in prices for March, but we are not clear by how much,” according to a major Middle Eastern PE pipe producer.

Selling sentiment remains firm, propped up by prevailing netbacks in markets like Turkey and the Americas.

For polyether polyols (POP), it would also not be easy to scour the Middle East markets for cargoes as availability from South Korean producers is scarce.

Buying within the region is strong on the back of firm demand for downstream polyurethanes (PU) foam.

Polyols whose supply remains tight amid limited upstream propylene oxide (PO) supply, are often reacted with isocyanates to make PU that are used to make mattresses, foam insulation for appliances (refrigerators and freezers), home and automotive seats, elastomeric shoe soles, fibres and adhesives.

On conventional polyols, some sellers were unable to make offers due to a shortage of base polyols.

Rigid polyols, however, is plagued by poor demand from downstream construction sector.

In the polyethylene terephthalate (PET) market, the outlook in the Middle East is bullish as peak buying season globally will start soon while the US outages will cut supply short.

For base oils, Group I grade supply in the Middle East will remain short through the first quarter, with scarce exports coming from Iran.

Regional Group II and III spot supply is expected to remain tight until the middle of the second quarter.

Supply is likely to remain challenged despite a light turnaround schedule in the Middle East, with India competing for spot regional cargoes amid some plant shutdowns in the country.

Focus article by Felicia Loo and Veena Pathare

Additional reporting by Hazel Goh and Izham Ahmad

Photo: Hamad Port, about 25 kms south of Doha, Qatar - 6 May 2019 (Photo by Kamran Jebreili/AP/Shutterstock)

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