Mid-Eastern PP, PE markets end 2023 on bearish note; what lies ahead in 2024?

In the Middle East, bearish sentiment permeated the marketplace for a second month in a row. Hovering around their more than 3-year lows, PP and PE markets remained pressured amidst globally weak fundamentals and regionally slack buying activities amid the year-end lull.

A quick delve into 2023

Unlike the past few years, when the markets faced big swings in the face of the pandemic, PP and PE prices moved in a relatively smaller range across the Middle Eastern markets. Having risen in Q1, markets dropped in April and remained bearish almost until August. The recovery in September and October proved short-lived as markets ended the last two months of the year on a bearish note.

From the peak-to-trough declines are generally around $200/ton price ranges in East Mediterranean and the UAE, while Saudi Arabia has seen prices trade in a narrower range of SAR350-525/ton ($90-140/ton) throughout the year.

Along with the December decreases, PP and PE markets across the region have almost erased the gains achieved in the past two months and have ended the year at their lowest levels since Q4 2020, when the markets first recovered from their all-time lows.

Saudi markets keep decreases in check in December

A major Saudi supplier’s new PE and PP offers to their local market indicated decreases of around SAR75-112/ton ($20-30/ton) and SAR37/ton ($10/ton) respectively as compared to last month. On a related note, another local supplier revealed its new December offers with decreases of SAR75/ton ($20/ton) for PE and SAR38/ton ($10/ton) for PP from November.

Unlike the rest of the region, where competition has gotten fierce and polyolefin prices are back to their August levels, Saudi Arabia managed to hold prices steady last month and issued only modest decreases in their local markets this month.

However, PP and PE prices still stood at their lowest levels since November 2020, according to ChemOrbis Price Index.

September and October gains wiped out in Emirati markets

Both import and local PP and PE prices continued to decline in the United Arab Emirates for a second month. A major Saudi producer’s new PP and PE offers were largely lower by $20-30/ton as compared to November. Following the $50/ton decreases reported last month, the downtrend seems to have slowed down to some extent in the UAE.

Meanwhile, local buyers reported receiving new December offers from the country’s local PP supplier with $30/ton decreases from November, when the same amount of decreases were reported.

Accordingly, UAE markets cancelled the gains achieved in September and October, reveals ChemOrbis Price Index, pointing to the lowest levels since October 2020.

East Med markets see largest declines amid deepening crisis

Players in the East Mediterranean region continued to receive lower import offers for PP and PE for December.

In Jordan, new PE offers surfaced with $50/ton decreases while PP prices descended by around $30/ton when compared to latest November ranges. " Concerns across the region are intensifying amid the recent war hence, trading activity continues to retreat," a film manufacturer illustrated.

December offers in Lebanon were likewise down on the month, with PP and PE prices witnessing monthly declines of around $20-30/ton. “The recent violence in the Middle East is increasingly affecting our country, which is already facing high inflation, poverty, and internal conflicts,” commented a local source.

Cumulative decreases seen in the last months reached $70-75/ton, according to ChemOrbis Price Index, with the recent prices even going below the previous lows and hitting their lowest since July 2020 in the PE market. Concerns about the deepening crisis between Israel and Palestine are playing a major role in the bigger slump seen in the neighboring countries.

January outlook soft across Mid-East

The prevailing bearish sentiment is likely to extend into the new year amidst tepid demand. Buyers are waiting for more clarity amid the ongoing war and growing economic problems. Regional factors are not there to justify any price hike from here, players agree. They also say, “It’s challenging to raise prices in the current scenario given the fragility of demand and lack of supply concerns.”

2024: Eyes on China and crude oil

However, the market trend will be highly dependent on global developments. There are critical questions swirling like whether China will be able to shrug off the sustained weakness or how long the recent disruptions in supply chain driven by the Red Sea attacks will last to propel oil prices higher.

Will Mid-Eastern producers go for annual shutdowns?

Although it’s not officially announced, Middle Eastern producers may conduct their yearly maintenance shutdowns in Q1 in a bid to outbalance poor demand. Their absence in previous years helped buoy prices across the board during Q1.

Even if producers may manage to reduce supplies to some extent in Q1, they will not be able to manage it in the latter parts of the year. Benefiting from cheaper light feedstocks, Middle Eastern producers do not tend to run their plants at reduced rates for the rest of the year like in the rest of the world.

Any new capacity ahead in Middle East to add more to supply pressure?

According to ChemOrbis Production News Pro, Advanced Polyolefins Company (APOC) has awarded Samsung Engineering to build a PDH unit in Jubail Industrial City with an 840,000 tons/year capacity. Once completed, it is set to be the largest PDH plant in the world, increasing Saudi Arabia’s total propylene output by more than 60 per cent.

As per the latest updates seen in October this year, construction is in full swing. The project is due to be completed and commissioned on schedule, ready for the facility to become operational in the second half of 2024.

This PDH plant was planned to be integrated with two PP plants with a similar capacity, according to the project, the start-up of which was again set for late 2024, if not delayed.