African PP, PE markets buckled under economic challenges in 2023; 2024 will be another uphill battle

African polyolefin prices are ending 2023 on a weak note. Disregarding two short periods of an uptrend, PP and PE markets mostly followed a bearish run during 2023. Demand was under constant pressure from persistent inflation woes and mounting currency challenges across the continent. Current import prices are largely standing at their 3-year lows, suggests ChemOrbis Price Index. What will 2024 unfold?

A brief look at 2023: PP, PE markets hit 3-year lows

Import polyolefin markets largely witnessed a downward sentiment for the eight months of the year, while the only price increases were seen in the February-March and September-October periods.

Subdued demand caused by unfavorable economic conditions kept the downward pressure on prices. According to ChemOrbis Price Index, African PP and PE markets first hit their lowest level since November 2020 in June, while the cumulative gains in September and November have been erased in the following two months, and import markets are largely back to their 3-year lows as 2023 ends.

Nigeria’s import PP, PE markets follow global bearishness

In West Africa, Nigeria’s import market followed the rest of the region lower with one-month delay. Depressed demand amid rising inflation and comfortable supply levels inevitably brought price reductions for December following November’s rollovers. Major Middle Eastern suppliers’ December offers were announced with monthly decreases of $40-60/ton. According to Nigerian market participants, activities remained limited, with most buyers purchasing hand-to-mouth.

Meanwhile, US PE offers continued to provide a competitive edge compared to Middle Eastern cargoes, standing $30/ton below Middle Eastern range for LDPE while this gap grows as much as $70-90/ton for LLDPE and HDPE film,b/m and inj.

ELEME’s PP, PE offers up for 5th consecutive month

Bucking the trend, Nigeria’s local producer ELEME announced NGN6700-24,000/ton ($8-30/ton) increases for PE offers and rollovers to up to NGN38,700/ton ($49/ton) increases for PP offers as compared to latest November levels.

According to local sources, the increases do not reflect an improvement in the demand state; rather, they resulted from the producer’s efforts to protect margins amidst continuous increases in the inflation rates and rampant devaluation of the naira against the US dollar. Inflation hit an 18-year high in October while the local currency has dropped by 45% since the beginning of 2023 to end the year at a record low on the official market.

Kenya takes no respite from decreases amid dull demand

In East Africa, offers from a major Saudi producer in Kenya were $50/ton down from November, which marked the second consecutive month of prices declines. New offers came in line with expectations amid the persistently weak demand across the country. “Demand is very slow here and the year-end lull is affecting trading activity further,” opined a local manufacturer.

North Africa sees increasingly more US PE offers at competitive prices

In North Africa, the bearish sentiment persisted across the markets as purchasing activity remained below average amid the stumbling demand and the rising concerns of political tension.

In Algeria, US PE offers re-emergedthis month, providing a competitive edge over the Middle Eastern cargoes, with offers standing at least $70/ton below Middle Eastern origins.

In Morocco, December PE and PP offers emerged with €30-50/ton ($34-55/ton) and €70/ton ($77/ton) decreases respectively when compared to November levels. Also, US PE offers were €50/ton ($55/ton) down from November, retaining their competitive power at the low ends of the ranges as they have held a gap of €30-50/ton with Middle East offers.

In Tunisia, December PP prices were softer by €10/ton ($11/ton) when compared to November levels, whereas PE offers were reported with rollovers to €10/ton ($11/ton) decreases from November. Sellers noted that discounts are achievable for serious purchasers amid the stumbling demand.

US influx caused more visible declines for PE than PP

The US has ramped up PE exports in 2023, and Africa also reflected this growth by seeing competitive offers from the major supplier throughout the year. Jan-October data suggests an all-time high for US PE exports to mainstream markets in Africa, already surpassing the data for the full year of 2022.

According to ChemOrbis Stats Wizard, Nigeria was the largest PE market for US PE this year in terms of tonnages across Africa, as the imports from the US soared by %56 on year. It was followed by South Africa with a relatively smaller yearly growth of 14%. Morrocco and Algeria followed in the third and fourth place. They also saw record high imports from the US as their imports doubled on year.

To what extent can markets recover in 2024?

Looking ahead, a lack of major improvement in downstream demand amidst chronic economic challenges and lack of supply concerns keep the outlook bearish. Market fundamentals locally do not justify any upturn in prices, bearing in mind that prices are already at their 3-year lows and there may not be further room for decreases.

However, African markets – as price takers – follow the footsteps of global markets, namely Asia and the Middle East. Any change in price direction in these regions will be reflected on African markets albeit with a delay.

Just recently, markets were rattled by the deepening Red Sea bottleneck with players keeping a close eye on sustainability of the recent uptick in crude oil prices. This is largely expected to have knock-on effect on polymer prices.

However, persisting macroeconomic problems across the continent remain a major headwind and they are not likely to be solved anytime soon. US PE may still increase its market share in Africa in the coming year – unless they face a major production issue and shift their focus away from export markets. This is because they have the ability to provide maneuver and necessary financing to their own agents operating across the region.