Middle East PE, PP demand stays weak as Asian markets tumble

SINGAPORE (ICIS)–Polyolefin demand across the Middle East continued to be weak,  tracking the sluggish Asian markets, as the year is drawing to a close.

Large cargo ships docked to load and unload goods at Khor Fakkport, Dubai (Photo by Deedee Degelia Brent Winebrenner Degelia/Mood Board/REX/Shutterstock)

Buying appetite for finished goods and resins typically wanes in November, while polyolefins end-users are bent on keeping stocks lean at the end of each financial year.

December offers are expected to emerge late this month but offtake is likely to remain limited as a result of curtailed year-end demand.

On 16 November, high density polyethylene (HDPE) film prices in the Gulf Cooperation Council (GCC) stood at $1,220-1,260/tonne DEL (delivered) GCC; while polypropylene (PP) raffia prices were at $1,240-1,300/tonne DEL GCC, both unchanged from the week before, according to ICIS data.

In the East Mediterranean region, HDPE film prices were at $1,160-1,230/tonne CFR (cost & freight), down $10/tonne at the high end of the previous week’s price range; while PP raffia was stable at $1,180-1,260/tonne CFR, ICIS data showed.

In Asia, PE and PP markets netted losses last week, falling by $10-50/tonne in China and were stable to soft in southeast Asia, due to poor demand and weak upstream markets.

Indian PP prices had one of their sharpest declines this year, falling $50/tonne on poor resin uptake that led to a build-up in stocks at domestic plants.

In the GCC region, a sluggish macroeconomic environment continued to hamper demand for finished plastic goods.

Purchasing was expected to strengthen after the summer holidays in July and August but did not pick up as anticipated, hampering resin uptake, according to a regional processor.

“Demand has really not picked up after Ramadan that ended in June. Demand was dull during the fasting month, followed by the summer lull in July and August. Nothing has improved even in September, when business should have resumed to normal,” said another regional PP processor.

The Muslim fasting month of Ramadan started on 16 May this year.

Industrial as well as food packaging segments in the region have struggled, with several regional processors opting to reduce operating rates at their facilities.

“An increase in cost of goods and services since the introduction of the value added tax (VAT) earlier this year has capped demand for food packaging in [the] UAE, one of the biggest markets in the region,” a Dubai-based PE and PP processor said.

In Saudi Arabia, the introduction of the VAT in January and an overall increase in cost of living following proposed cuts in energy subsidies had led to reduced demand for polymers, including PE and PP.

Saudi processors grapple with slow movement of goods in downstream markets and face payment delays which restricted their cash flows, thereby curtailing their purchasing power for resins.

Falling monomer and polymer values across Asia aggravated the bearish market sentiment in the Middle East, where PE availability is ample and augmented by supply from the US.

The Middle East exports polymers to markets across the globe.

In the PP market, although availability was on the tighter side given a few unexpected plant outages, prices have stayed soft amid weak demand persisting across Asia and the Middle East.

In the East Mediterranean (East Med) markets, demand has also stayed weak amid political instability afflicting Iraq and Syria, two of the biggest markets in the region.

This hampered resin offtake in the export-oriented market of Jordan, which primarily imports resins to export finished goods to Iraq, Syria and Israel.

In Israel, the recent implementation of tariffs on goods imported into US has led several local processors to take a cautious stance on the market, an East Med PE and PP importer said.

Several East Med importers also faced curtailed cash flows, with many continuing to operate their units at reduced rates following weak sales.

Focus article by Veena Pathare