Africa PE, PP markets offer mixed outlook on pricing

14 May 2014 17:44 Source:ICIS News

Focus article by Jo Pitches

Mixed outlookLONDON (ICIS)--Market participants’ opinions on the outlook for the African polyethylene (PE) and polypropylene (PP) markets varied this week, with some expecting stable to higher prices, while others anticipate prices to be softer over the coming weeks.

With the African market often tracking the Chinese one, albeit with a lag of a few weeks, some participants draw expectations from performance and prices in China.

The Chinese market has recently seen healthy demand and relatively strong prices. A number of Middle East producers have been diverting volumes to the region instead of Africa, as netbacks are better.

However, now this Chinese strength is looking uncertain.

One Middle East producer of homopolymer raffia said: “The expectation for China is [that prices and demand will go] back down again. A softer China [market] could impact [African] prices in June. China is not in a strong position.”

This source added that its expectation for African prices in the coming weeks is stable to softer, with stability more likely.

In contrast, some Middle East producers expect the African market to stay relatively strong for the next few weeks as Muslim pre-buying ahead of Ramadan tightens Middle East supplies. Ramadan starts near the end of June this year.

“We know in the Middle East we'll have steady demand and a tight supply market, especially on PP going into Ramadan,” one producer said. “It’s [always] quite good in the run up to Ramadan, we’re producing for consumption in Ramadan now. Packaging demand goes through the roof.”

“It’ll be stable to bullish during that period, regardless of [what happens in the PE and PP markets in] China,” the producer added. “If anything happens [to African prices] it'll be July, August. Europe [prices] will change then. That's when they [producers] look at stocks, and stocks get liquidated”.

Yet other participants find the influencing factors far too volatile to speculate on African pricing in the coming weeks.

“This time around I can't speculate in terms of prices,” a distributor in the West Africa market said. “Things change overnight, everything goes out of the window. But whichever way [prices go] it'll be a small move up or down. [It is a] Question of wait and see.”

Nevertheless, the distributor expects any African price movements to be minimal, based on price movements during the last few months.

“There’s more chance for [African] prices to remain the same,” the source added. “Whatever it is, it's been [movements of] $20-30/tonne [in either direction] or rollovers for the past year.”

By Jo Pitches