Gulf PE, PP supply to stay tight on shutdowns, logistics woes

By Ong Sheau Ling

SINGAPORE (ICIS)–Polyethylene (PE) and polypropylene (PP) supply from the Gulf Cooperation Council (GCC) region may remain tight for the rest of the year given prevailing logistics problems, and with a number of regional facilities due for turnaround in the coming months, industry sources said on Friday.

Most GCC producers currently have low inventory after a selling spree in June to early August, market sources said.

Short positions in polymers of GCC origin were especially evident for most grades of PP, linear low density PE (LLDPE) and high density PE blow moulding, market sources said.

Consequently, most GCC-based producers implement allocations to customers and have no spare cargoes to sell, industry sources said.

Allocations for September shipments to Middle Eastern and Asian customers were cut by as much as 50%, they said.

Most GCC producers said they are still holding on to lower-than-usual stock levels, because of good sales volumes seen in the third quarter.

“We do have lower inventory levels. Everybody does. This is because we had good sales in the last few months,” said a source from Saudi polymer major SABIC.

GCC-based makers may have oversold products to Asia and Europe in July to September amid an uptrend in prices.

In northwest Europe, spot prices of PP raffia surged by $381/tonne (€293/tonne) or 28% in mid-September from early August, while in China, prices of the same material rose by $120/tonne or 9% over the same period, according to ICIS.

Delays in shipping cargoes because of severe congestion at Saudi Arabia’s Dammam and Jeddah ports are tightening supply of GCC material further, market sources said.

“There are just too many containers stuck at the port. Vessels are just not picking up the containers,” a Saudi Arabian polymer maker said.

Containers continue to accumulate at the ports because of insufficient availability of vessels, industry sources said.

“At the Jeddah port, the congestion is worsening,” another Saudi Arabian PE, PP producer said.

Delays in shipping from Dammam and Jeddah could be for up to a month – disrupting customers’ supply chain.

“We have to borrow material from our fellow competitors to keep fulfil our orders,” a GCC-based converter said.

“They have to do something to the ports. We can’t have this happening every year after the Eid [ul Fitr] festival,” another GCC-based processor said.

Port congestions in Saudi Arabia typically happen after the Eid festival, when working hours are reduced, slowing down processes at the ports such as paperwork to dispatch cargoes from ports, market players said.

Eid ul Fitr marks the end of the month-long Muslim fasting month of Ramadan, which started in mid-August.

“We can only hope for the congestions to normalise by end of this year,” a third Saudi Arabian PE, PP maker said.

On land, transport of cargoes is also being disrupted.

For instance, a shortage of Syrian drivers led to severe delays for resins moving from the UAE to Jordan.

“We are facing logistics problems in both land and sea,” a Dubai-based trader said.

Impending turnaround at major GCC facilities would also shave supply, requiring producers to control their sales volumes, industry players said. (please see table below)

Some players expect supply of other product grades such as low density PE (LDPE) and HDPE film to be less tight in view of recent capacity additions.

Saudi Polymers has started full commercial operations at its Al Jubail production site in Saudi Arabia on 1 October. It has a 1.1m tonne/year HDPE facility and a 400,000 tonnes/year PP unit at the site.

Qatar Petrochemical Co (QAPCO) has also started running its new 300,000 tonne/year LDPE at Mesaieed, with on-spec materials expected to reach its customers in Jordan for the first time this month.

“With most GCC-based producers equipped with low stocks for the meantime, it is hard for prices to plunge even if demand typically weakens towards year-end,” a GCC-based PP producer said.

The GCC consists of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.

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