PP and PE markets reverse course after 2 months in Africa, what lies ahead for May?

After price gains lost steam back in March, Africa’s polyolefin markets have turned soft this month, caused by weak derivative demand. Small price declines were reported for April across the continent even with Nigeria’s local market following suit after 8 months. Now, May is approaching with mixed anticipations given high costs and lethargic demand.

Nigeria responds to tepid demand much later than other markets

In Nigeria, the largest African market, April PE offers retreated from a 10-month high after a Saudi major approached the market with $20-40/ton decreases when compared to March levels. Also, PP offers were reported with $50/ton decreases from March. According to market sources, depressed demand amid simultaneous interest rates hikes, rising inflation and Naira devaluation have caused dire effects on the cost of everything. “However, the recent appreciation of the naira in the wake of economic reforms has raised some optimism about the upcoming outlook,” opined a local source.

According to media sources, the naira rallied 12% against the dollar in April, adding to its 14% surge in March. Capital inflows and interest rate increases have helped it to retrace the steep losses caused by two devaluations since last June after the government loosened currency controls. “Nigeria’s naira could extend gains that have already made it the best-performing currency in the world this month,” said a Goldman Sachs Group Inc. economist.

ELEME snaps 8-month successive hikes

Nigeria’s local producer, ELEME, announced NGN275,000-278,200/ton ($221-224/ton) decreases for PE offers and NGN275,000-366,200/ton ($219-292/ton) decreases for PP when compared to initial March levels, marking the first decline since last August.

Generally, the producer had to steadily increase its NGN-based offers over the previous months to counteract the depreciation of the local currency; however, the USD equivalence of its prices still indicated decreases in January and February, according to ChemOrbis Price Wizard.

Sellers in East Africa issue rollovers, succumb to lower bids

In East Africa, April PE and PP offers in Kenya were announced largely with rollovers following slight decreases during March. However, renewed discounts of around $20-30/ton were achieved on deals. According to media sources, the Kenyan shilling gained 16 percent in the first quarter of 2024 to stand at a new high of 131.8 to the U.S. dollar at the end of March, the Central Bank of Kenya said.

Thin activities spur additional discounts in North Africa

In North Africa, Middle Eastern sellers have initially approached the markets with rollovers to decreases from March. Nevertheless, buyers managed to obtain additional discounts with poor demand and a relative improvement in availability staying at the fore, outweighing strong costs.

In Morocco, players reported April PE and PP offers with respective decreases of €30-50/ton ($32-54/ton) and €50/ton ($54/ton) when compared to initial March levels. However, April deals stand lower than March deals by €20/ton and €40/ton ($43/ton) respectively. “Buyers were reluctant to engage in fresh purchases amidst a holiday-shortened month,” commented a local source.

In Tunisia, Middle Eastern sellers revealed their PE and PP offers for April with rollovers to up to €30/ton ($32/ton) decreases from March. Players had also reported thin trading activities underscored by weak derivative demand.

In Algeria, April PP and PE offers were reported with $20-30/ton decreases on a monthly basis. Sources reported that new offers had met the market’s expectations, yet purchases remained limited amidst anticipations of further declines given unsupportive demand.

Players to monitor crude oil benchmarks and state of demand

As April is nearing an end, players’ attention turned towards possible price scenarios for May. Globally bull indications of strong energy complex were not enough to lift the polyolefin markets during April. Indeed, this month has seen Brent oil prices constantly trading at and above the $90/bbl threshold, although they have recently been corrected way down on prevailing demand concerns. “A demand revival along with relatively restrained allocations from the Middle East might induce sellers to preserve their margins; however, whether manufacturers will manage to pass on higher raw material costs to their end-product customers remains unclear,” a regional source opined.