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Local PP, PE offers for July track global uptrend in Saudi Arabia

by Başak Ceylan - bceylan@chemorbis.com
  • 07/07/2020 (10:51)
Saudi Arabia’s domestic PP and PE markets started off July with increased offers. This has been largely supported by a rising trend in global markets, which came amid a gradual return to normal after months of strict restrictions.

Saudi major leads hikes in local market

As the degree of optimism in global markets increased, so did a major Saudi producer’s offers to export markets. Another factor contributing to the increases was the supply tightness , as reported by several players. The major producer’s offers to the local market saw similar hikes, some of which were beyond what players had expected.

Following the major producer, several other key suppliers opted for hikes ranging from SAR75/ton ($20/ton) to SAR263/ton ($70/ton).

Latest PE offers up by 6.5% on average

The first producer hiked PPH offers by SAR75/ton ($20/ton) over June while also increasing PE offers by SAR112-262/ton ($30-70/ton). Accordingly, the producer’s offers were at SAR3375/ton ($880/ton) for PPH raffia and inj., SAR3450/ton ($920/ton) for PPH fibre and film; SAR3075/ton ($820/ton) for LLDPE C4 film, SAR3188/ton ($850/ton) for HDPE film and b/m, and SAR3300/ton ($880/ton) for HDPE inj., all FD Jeddah, cash.

As compared to June level, the second producer’s increases were SAR262/ton ($70/ton) for PPH raffia and inj. and SAR225-263/ton ($60-70/ton) for PE grades. These changes brought the producer’s latest offers to SAR3300/ton ($880/ton) for PPH raffia and inj., SAR3075/ton ($820/ton) for LLDPE C4 film, SAR3263/ton ($870/ton) for HDPE film and SAR3300/ton ($880/ton) for HDPE b/m, all FD Jeddah, cash.

The third local supplier offered a more competitive edge as compared to other two producers. The producer’s offers were at SAR3187/ton ($850/ton) for PPH raffia and inj., SAR3188/ton ($850/ton) for HDPE b/m, and SAR3150/ton ($840/ton) for LLDPE C4 film and HDPE film, all FD Jeddah, cash. Despite their advantage in terms of pricing, the producer’s offers were still SAR187-188/ton ($50/ton) higher than those seen in June.

This marked the second month of increases for PE offers in Saudi Arabia while it was the first since March for PPH offers. According to ChemOrbis Price Index, the latest PE offers stand 6.5% higher on average as compared to early June levels. Offers for PPH are also 4.5% higher on average from last month.

Restrictions ease but new concerns emerge

Movement restrictions and other virus control measures have been largely lifted. This in turn has increased the degree of optimism among market players and also eased logistical challenges to a certain extent. However, there emerged a new concern for players recently.

The value added tax (VAT) rate in Saudi Arabia increased to 15% from the previous 5% on July 1. The increase was part of economical measures the government took in response to the impact of the COVID-19 crisis.

“This might decrease the level of activities,” a source from the first producer said, citing a possible increase in costs as a direct effect of the rate increase.
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