African PE, PP prices buck global trend

LONDON (ICIS)–Polyethylene (PE) and polypropylene (PP) prices are currently rising in most regions around the world.

Asian prices have been spiking since July following a jump in the cost of ethylene and propylene. Supply levels in the US have been effected by Hurricane Harvey, which in turn, is having an effect on sentiment worldwide.

European suppliers are bullish on September contracts. Turkey began an upwards trend but that has been stalled by the Eid al- Adha holiday but firmer pricing is anticipated in September.

African players, however, remain resolute in their determination to resist hikes and prices there have remained unchanged again this week, despite higher September offers from some sellers.

“[Buyers] may have been stocked up in summer. Our order books are not very strong. Giving them confidence to negotiate for best deals on the market” said one seller.

“Some are asking for lower prices” it added.

Africa often lags behind trends in other markets but sellers were confident this was a prime opportunity to increase prices. A continued lack of demand has countered higher offers. Buyers continue to stay away. African players have a tendency to retain large stocks to insulate against outside price pressure.

The pressure is likely to eventually force movement in African prices. If the continent remains uncompetitive on pricing, it will soon find imports levels drop. One seller has said that it is already giving preference to Asia.

“Our focus is on Asia, not Africa. Don’t want to give much volume at lower prices” said a supplier.

There has been little success for initial September offers as Middle Eastern suppliers are only returning from the Eid al- Adha holiday this week. Some sellers are optimistic for the rest of September as they expect demand to build and supply levels to become strained.

Sources have previously suggested that Africa tends to recover in October after the rainy season, following a traditional summer lull.

Kenya, one of the continent’s biggest economies, has seen the plastics industry slow to a crawl.

The Kenyan market is in a state of stasis as the 8 August election result was overturned in court, following a challenge from the main opposition party.

A new election date has been set for 17 October. Raila Odinga, the opposition leader, has claimed that he will only participate in the vote if his party receives guarantees against alleged voter fraud.

This opens the door to further political upheaval, as the new vote is only to be contested by the ruling Jubilee party and main opposing party, the Nasa alliance.

Fears remain that political violence could stir up. Many players stayed away from purchases before the last vote and will likely hold a similar stance for this one.    

The plastic bag ban is also troubling many players. Film business is at a standstill, according to one source. A lack of clarity on what is, and is not, included in the ban resulted in most converters closing their operations, fearing fines or prison. 

“Manufacturers have shut down until we get some clear picture of what is going to happen” said one player.

For example, any film that comes into contact with food is included in the ban but the same film is used to wrap bottles of soft drinks. Manufacturers are unsure if this would be included in the ruling, so are choosing to not produce. 

A combination of these problems will probably see East Africa struggle with demand for the next few months.

The lack of packaging could limit the availability of produce, as shops struggle to come to terms with the inability to use traditional packaging, according to one trader.

Kenya is a key port for the region. It also produces many products that are sold onto the rest of East Africa so the current political turmoil will ripple beyond.

Further elections are due in Liberia, in October, and in the Deomcratic republic of Congo at some point before the end of 2017.

At the same time both South Africa and Nigeria emerged from recession but with serious questions over their economic governance remaining.

Africa remains a region able to stand apart from global trends but eventually the reality of international trade will tell.

The difficulty comes in trying to predict when that will happen, and if the global uptrend can outlast African resistance.

Focus article by Ben Lake

Image source: Dinendra Haria/REX/Shutterstock