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Mid-Eastern PP, PE markets rise in February after three months of weakness

by Nada Samir - nada@chemorbis.com
by Esra Ersöz - eersoz@chemorbis.com
  • 20/02/2024 (12:19)
Players in the Middle Eastern PP and PE markets received February offers from regional sellers mainly with increases from January, the first time since October. Soaring feedstock costs and firming global markets supported price hikes across the region, not to mention restrained supplies amid the maintenance season at major plants, mainly in KSA.

Saudi markets rebound, except for LDPE

In Saudi Arabia, new February offers from a major domestic producer indicated SAR75/ton ($20/ton) increases for PE; except for LDPE prices which remained unchanged. Meanwhile, PP offers indicated SAR94-169/ton ($25-45/ton) increases as compared to January levels.

Advanced, PetroRabigh and Al-Waha all have their PP plants shut until the end of February, according to ChemOrbis Production News Pro, while Saudi Kayan and SEPC (Saudi Ethylene and Polyethylene Company) have just returned from their planned maintenance shutdowns.

Saudi PE producer’s margins set to squeeze

On a related note, petrochemical producers in Saudi Arabia are set to face higher production costs as state-owned refiner Saudi Aramco has raised domestic ethane feedstock and fuel prices.

Aramco has raised domestic ethane prices by 43% from $1.75/mn btu to 2.50/mn btu. The price changes took effect on 1 January. The last change in ethane prices was in December 2015 when Aramco more than doubled prices from $0.75/mn btu to 1.75/mn btu. Those hikes raised concerns among PE producers about their competitive advantage in export markets. Saudi PE producers have already been facing challenges in China, losing market share to the US, as they were not able to offer cargoes at prices as competitive as their competitors without having their margins compromised significantly.

Emirati import markets rally; local PP market bucks the trend

Middle Eastern producers also opted for price hikes in the United Arab Emirates. Major regional suppliers applied increases of $40-70/ton on PE and $50-110/ton increases on PP compared to latest January levels.

On the contrary, initial February offers from the country’s local PP producer, Borouge, emerged with rollovers from January before discounts of around $30/ton were achieved on deals.

The UAE’s Dubai has recently imposed a ban on plastic bags while the ban is expected to be applied across the country within the following years. The increasing global focus on environmental sustainability poses challenges for the polyethylene market. Buyers argued that these measures will be applied gradually and have not had much impact on HDPE demand so far, although it should start to have some reflection in the medium term.

East Med PP markets rise to 8-month-high

In East Mediterranean region, a major Saudi producer’s PP and PE offers to Jordan were announced with $100/ton and $60/ton increases respectively when compared to January levels. Likewise, initial February PP and PE offers surfaced in Lebanon with $90/ton and $70-80/ton increases respectively from January. Yet buyers managed to conclude lower deals by $20-30/ton.

According to ChemOrbis Price Index, current PP prices hit their highest levels since June 2023. However, the market is facing many challenges stemming from global economic uncertainties, including fluctuation in crude oil prices, trade tension and geopolitical instability.

Will further hikes follow in March?

Players across the region expect resin prices to remain on the firm side during March, with supply tightness considered a key factor supporting firm footing. On the other hand, concerns over sluggish end-user demand especially with the approaching holly month of Ramadan and economic struggles across the region keep the amount of potential hikes in check.
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