Africa PE prices fall, bottom of the market not yet in sight - sources

08 June 2017 13:15 Source:ICIS News

Mint Images/REX/Shutterstock

LONDON (ICIS)--Some polyethylene (PE) prices have fallen in Africa this week on continued weak sentiment, and some sources this week said they do not think the bottom has been reached yet.

Now that Ramadan has begun, most sources are not expecting much activity this month.

Oversupply remains an issue as high-density polyethylene (HDPE) continues to be supplied in large quantities, especially blow moulding grade.

Large volumes are being supplied from Asia where domestic prices are outcompeting importers. Poor sentiment has left Asian players pessimistic of chances of imported prices competing at lower levels.

US players have also been making low price offers into the region. This is in an attempt to secure trade routes and establish logistics before new ethylene production facilities open in the US later this year, according to a source.

"There is so much ethylene coming online, they built their reactors before the crackers come online,” said a source.

US producers face an abundance of ethylene due to proliferation of shale gas production. This will likely see a steady stream of PE products from the US.

Weakness in the African market continues as buyers have stayed away, partly because they have confidence in high supply levels. Competition between sellers has pulled prices down in recent months.

Prices coming from the US are very low at $30-40/tonne lower than Middle East prices.

"We can clearly see the problem is coming from the demand,” said a trader.

African players tend to sit on large stocks and buy hand to mouth during downturns. With the proliferation of PE products arriving in Africa, there seems little indication of any change to the negative trend.

Ramadan and the rainy season will limit demand over the coming month but even beyond that, ample supply could supress prices even if current levels have reached the bottom.

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Focus article by Ben Lake

(Picture source: Mint Images/REX/Shutterstock)

By Ben Lake