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Will Africa’s PP, PE markets extend drops into June?

by Nada Samir - nada@chemorbis.com
  • 29/05/2024 (10:55)
In Africa, PP and PE markets saw lower offers from the Middle Eastern suppliers in May, marking the second consecutive month of price drops as a knee-jerk response to bearish crude oil futures, not to mention challenging economic headwinds and thin derivative demand. Nevertheless, elusive supplies amidst persistent Red Sea disruptions deterred steep falls. Now the question is whether this bearish sentiment will continue next month or not.

West African PP, PE markets respond to thin demand

In Nigeria, the region’s largest polymer market, May PP offers from a major Saudi producer indicated $10-30/ton decreases when compared to initial April levels. Also, initial May PE offers were down by $20-40/ton when compared to April levels; however, additional discounts were passed on deals.

According to local sources, South Korean offers especially for HDPE grades showed up this month, but they failed to offer a competitive edge as compared to the Middle Eastern origins. “Trading activity has improved when compared to the previous month, but buyers are still cautiously securing their needs,” a local source opined.

ELEME cut initial May offers, yet depreciating Naira comes to the fore once again

Nigeria’s local producer, ELEME, revealed the new May offers with NGN194,700-195,000/ton ($139-140/ton) decreases for PE and NGN173,500-175,000/ton ($119-120/ton) decreases for PP from April, marking the second straight month of price cuts.

According to media sources, the Nigerian naira has fallen by 26.8% erasing all the gains recorded during April, being the world’s worst-performing currency in the last month. Buyers are pondering whether the producer will raise its offers again post the local currency depreciation, or if sluggish demand will thwart any attempt to hike prices. “The producer is expected to revisit its pricing strategies to counteract the renewed inflationary pressure,” a market source commented.

Kenyan markets challenged by environmental disturbances

In Kenya, the largest economy in East Africa, initial May PE offers from a Saudi major exhibited a softening of $20/ton compared to initial April prices; however, subsequent negotiations have led to deals being concluded at levels similar to those observed in late April. Meanwhile, May PP offers indicated mostly rollovers when compared to the latest April deals.

Generally, demand remains stagnant across the market amidst the recent environmental challenges. Meanwhile, weeks of heavy rain due to seasonal monsoons have led to flooding and massive damage to key infrastructure. According to media sources, the effect of flooding will have a massive impact on the country’s economy.

Slack demand outweighs restrained supplies in North Africa

In North Africa, May PP and PE prices were assessed softer when compared to April levels as demand remained subdued despite the prevailing scarcity in supplies. The persistent disruptions in the Red Sea have had a significant impact on the shipments to North Africa, leading to delays, increased costs and logistical challenges for business owners.

In Morocco, May PE prices were down by €40-50/ton ($43-54/ton) when compared to initial April while they were assessed slightly lower compared to latest April deals. Also, PP prices were down by €10/ton ($11/ton) from the latest April deals.

In Tunisia, both PE and PP prices were down by €10-20/ton ($11-22/ton) on a monthly basis. “Restrained supplies as well as discounted prices had not stirred any extra buying enthusiasm amidst dull demand,” a distributor stated.

In Algeria, regional suppliers revealed May PE prices with $10-20/ton decreases when compared to April. Moreover, May PP prices recorded decreases of $20/ton on a monthly comparison. According to market sources, limited supplies kept the amount of decreases limited despite unresponsive demand.

Markets search for directions amid supply concerns, lukewarm demand

Players across the region continue to voice their concerns about the chronically weak derivative demand and diminishing hopes of notable demand improvements over the near-term given the approaching Eid al-Adha holidays by mid-June. Moreover, upstream costs are down compared to the previous weeks which call for bearish sentiment.

Nevertheless, limited import volumes, shipment issues and higher freight rates from Asia as well as the recent shift in sentiment change in major spot markets including China and Türkiye might buoy sellers to seek margin recovery.
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