Middle East PP, PE outlook for 2025: A double whammy of low demand and new capacity additions

Saudi Arabia, the UAE and East Med markets have all experienced much less volatility this year than they did last year, although PP and PE prices have been on a downward trajectory in the last quarter. Early expectations for January point to a potential shift in prices while geopolitics and capacity additions continue to cast a pall on the region for the rest of the year.

Tepid demand and lengthened supplies, not to mention the flow of aggressive US offers into the region, have all weighed down on the region. “PP prices in Saudi Arabia, however, are up for the second straight month, which might be a harbinger of a bullish trend that may soon emerge in the rest of the region,” players said.

Key excerpts from 2024

In 2024, PP and PE markets across the bloc have faced unfavorable economic and political challenges including depreciating local currencies and the outbreak of war in Gaza strip and Lebanon.

Despite all these challenges, ChemOrbis Price Indexes put forward that all regional markets have gone through a smaller extent of volatility in 2024 than in 2023. Saudi Arabia’s PP and PE markets have fluctuated in a SAR200-300/ton range on average while the UAE and East Med markets have experienced a $100-150/ton fluctuation throughout the year. This has been nearly half of the price changes of last year, from peak to trough.
This must have stemmed from the fact that supply has been kept in check by regional producers through production cutbacks in an already ‘low demand market’, and supply flow to the region has been more restricted than before following the Red Sea turmoil.

Back in January, Saudi Arabia’s move to restrictPP exports from local resellers in a bid to avoid the abuse of competitive prices provided to local customers also might have avoided larger price fluctuations, erasing “cheap prices” in the market.

Here follows a glance of how these markets across the region have ended 2024.

Saudi PP markets up marginally for 2nd month, PE down for 3rd month

In Saudi Arabia, December PP offers from a major local producer indicated SAR26/ton ($10/ton) increases as compared to November levels, marking the second straight month of slight hikes requests with total gains of SAR60/ton ($16/ton) for the two months despite bearish PE prices.

It is noteworthy that although these PP price hikes have defied the overall trend for the last two months, the cumulative gains are indeed not big enough to push prices to new highs. ChemOrbis Price Index suggests a total gain of SAR60/ton ($16/ton) on average with prices ending the year close to the level seen at the beginning of the year.

Differing from PP, December PE offers from a Saudi major indicated rollovers to SAR37/ton ($10/ton) decreases when compared to a month earlier. This was the third month in a row for decreases, whereas LDPE prices defied the weakness in other grades and moved higher.

Saudi LDPE market at a 30-month high

ChemOrbis Price Index suggests that LDPE film prices in Saudi Arabia have followed a stable to firmer trend since the beginning of 2024 and they have recently reached their highest level since May 2022. This has been right in line with the global trend as LDPE has remained quite firm with respect to other PE products given the lack of widespread capacity additions.

According to local sources, tepid demand remains intact amidst approaching year-end book closures. “Nevertheless, the producer is trying to preserve PP prices against the re-export activities from subsidized local manufacturers hence kept them upbeat this month too,” a local manufacturer opined.

UAE markets succumb to waning demand

In the United Arab Emirates, Middle Eastern suppliers revealed their initial December PP and PE offers mostly with rollovers when compared to the latest November levels. Shortly after, $20-30/ton discounts were reported on deals. Weak market fundamentals amidst slack demand and sufficient supplies coupled with year-end lull have resulted in discounts on deals despite sellers’ rollovers trials, as players put it.

US influx keeps East Med markets under pressure

In the East Mediterranean region, PP prices witnessed more visible decreases of $30-60/ton when compared to November. Market participants agreed that demand at derivative segments remained at its lowest levels, which was reflected on polymers purchases. “Also, falling prices and the existence of competitive US origins this month too kept players at their toes as further decreases from Middle East suppliers are anticipated,” a Lebanese-based distributor stated.

Meanwhile, PE markets witnessed mostly rollovers in Jordan or slight decreases of up to $20/ton in Lebanon as compared to November, with players reporting short HDPE film and LLDPE film for December.

Q1 outlook firm across Mid-East, but fragile demand looms large

PP and PE prices across the bloc might have hit their bottom and an expected recovery is cited for early 2025 amidst increasing logistics costs and tight sellers’ margins, who struggled to see significant price increases throughout 2024.

Nevertheless, a slew of bearish factors including waning derivative demand, deep economic challenges, geopolitical unrest, excess supplies and lower oil demand projections, have all wiped potential notable hikes requests for the new year.

New capacity additions from the Middle East are around the corner

Saudi Arabia, as the world’s one of leading PP and PE exporters, is readying to welcome a new PP capacity in 2025. Advanced Petrochemical’s PDH-PP project in Al Jubail is soon set for launch. The joint venture with South Korea’s SK Chemicals started construction in 2021. The PHD plant’s start up is slated for late 2024, followed by PP start-ups in Q1 2025, according to the sources close to the company. Each plant has 800,000 tons per year capacity.

Not only Advanced, but also the UAE’s Borouge is also preparing for the start-up of the new complex, called Borouge 4 next year. The project was over 70% complete as of mid-2024 with plans to start operations by the end of 2025. The new complex will house a huge ethylene cracker of 1.8 million tons per year capacity as well as 1.4 million tons per year of PE plants.

These new capacities will not only add more supply to the region, but also to the global polymer markets, which have already been buckling under an acute supply glut. Although a big portion of these capacity additions will be allocated to export markets, regional markets may also bear the brunt of them. This may also risk Middle Eastern suppliers’ efforts to stick to their policy to keep price volatility under check like they have done so far in 2024.