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Mid-Eastern PP, PE markets fall for fourth month running in August

by Başak Ceylan - bceylan@chemorbis.com
  • 09/08/2022 (02:42)
Polyolefin prices in the Middle Eastern markets fell for the fourth month running amid a combination of bearish factors, including softer demand from derivative sectors, volatility in energy and raw material costs, higher inventories, challenging economic conditions, and an unpromising outlook for the near-term.

Saudi markets down to more-than-a-year low

Saudi producers were pressured for further discounts based on a global weakness in PP and PE markets, as well as disappointing demand among domestic market players. A major local producer’s new offers came with decreases of SAR375/ton ($100/ton) for PP grades, and SAR300-375/ton ($80-100/ton) for PE grades. Offers from another local producer were announced with similar drops, driving the overall price ranges to their lowest in more than a year.

Demand remained a key factor in Saudi polyolefin markets. With activities still at unsatisfactory levels, the recent price concessions did not come as a surprise, players said. Although the rate of inflation edged lower in Saudi Arabia, it remained the second quickest since August 2020. Amid these headwinds, most players expect the downtrend to ensue in days ahead unless producers make drastic cuts in output.

Sharp drops fail to revive demand in UAE

Saudi producers also announced lower offers in the United Arab Emirates, where demand continued to slacken amid slower end-product sales. New offers for August offers were lower by $80-150/ton for PE and around $200/ton for PP when compared to the initial levels in July.

The local producer too announced price drops for August, sharply cutting their PP offers to the domestic market by $240-300/ton.

However, Emirati market players were hopeful that further price concessions would be available in upcoming days. A trader, who reported that July was among one of the worst months they had, said: “The weakness in demand could be partly attributed to summer season but it is much slower than it was last year. July was among one of the worst months we ever experienced in terms of trading. As a result of this ongoing weakness, we expect sellers to issue further discounts in deal levels.”

Will East Med markets see even lower levels in deals?

Expectations for further price cuts were also dominant in the East Mediterranean markets. Although regional producers announced monthly price reductions of $100-150/ton in Jordan and $50-100/ton in Lebanon, the persistent weakness in demand and activities raised the possibility of even lower levels in the region.

“There is a poor outlook for the rest of the year. Unless market fundamentals improve greatly, we are likely to see further price drops in the upcoming weeks,” a trader in Lebanon said. The trader also said that acute political and economic instability in the country continued to weigh on trading in August.

A trader in Jordan said: “Despite the new round of decreases, end business demand has remained quite disappointing. As a result of this, buyers are still limiting their purchases.”
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