Resin suppliers in Africa are pressing for price increases on the basis of higher energy costs driven by the Ukrainian/Russian conflict and the potential of diminishing supplies in an already tightly supplied market. Although most PP and PE grades saw price increases in March, underlying demand remained weak across the markets.

Production, delivery issues reported in Nigeria

New offers in West Africa’s largest polymer market were increased by $10-80/ton from last month, largely due to increased pressure from costs. Although Nigerian players continued to report shipments delays, availability in the market was “sufficient” at large, balanced by prevailing demand conditions.

Nigeria’s local producer ELEME’s PE offers increased by NGN40,000/ton ($98/ton) from the previous levels while PP offers rolled over in March. Traders reported that feedstock shortages resulted in suspended operations and deliveries early in the month. Surging transportation costs amid higher fuel prices were also cited among factors that affected local pricing.

Buyers prefer to stay cautious despite rally in Kenya

In Kenya, the largest economy of East Africa, HDPE film and LLDPE C4 film offers for March surged by $100-120/ton month-on-month and were reported at $1560-1580/ton and $1540-1560/ton, respectively. LDPE film offers were largely stable at $1580-1600/ton. New PPH raffia and inj. offers were also firmer by $120/ton from last month at $1570-1580/ton CFR Kenya.

Kenyan traders noted that sellers maintained a firm stance despite limited buying intentions from end-users. “Bullish global trend and tightened supplies in the region directed pricing in March. We are not buying beyond our immediate needs and monitoring the markets to see where prices will land in April,” a trader said.

North African markets shift direction in March

After a month of downward pricing, North African markets shifted direction in March. Amid rising costs and tighter availability, new PPH raffia and inj. offers in Algeria rose by $40/ton from February to $1640-1650/ton CFR Algeria. HDPE film and LLDPE C4 film increased by $30-60/ton from last month to $1600-1620/ton and $1580-1600/ton, respectively. The sharpest price increases were for LDPE film, which surged by $160-180/ton over February at $1930-1950/ton CFR Algeria.

March offers in Tunisia and Morocco were assessed at a combined range of €1350-1380/ton for HDPE film, €1520-1620/ton for LDPE film and €1330-1380/ton for LLDPE C4 film, all indicating increases over levels reported in February.

Meanwhile, demand remained largely subdued across the North African markets, with most buyers restricting their purchases to hand-to-mouth basis. Tunisian traders reported expectations of discounts in deals while Algerian traders reported lower bids from buyers, challenging the increased levels in the market.

Outlook firm but demand raises questions

Volatile oil prices due to the ongoing conflict in Eastern Europe are raising feedstock costs, and the potential of further disruptions in supplies is emboldening producers to take a firmer stance in pricing to offset these risk factors. As a result, most players expect markets to continue increasing. At the same time, players point out that there are threats of demand destruction.

(Source: Chemorbis)

Import PPH prices continue to rise in India as players resort to stock building in anticipation of higher prices. Indian buyers, who mostly remained on the sidelines in November – December, have been back to replenish stocks. Accordingly, the uptrend that kicked off in January is readying to persist in February.

Import offers of PPH raffia were reported at $1350-1390/ton CIF India for February delivery cargoes, about $30-40/ton higher than prices reported about a week ago.

Apart from the strength in the energy complex, a trader associated with an Indian producer also pointed out that import prices here are tracking the strength in markets across the globe. “Offers from Asia have dried up ahead of the Chinese New Year (CNY) next week. And we hear about production issues in Thailand and Indonesia which could squeeze supplies to the sub-continent,” he added.

A few deals were sealed for Middle East origin PPH raffia at $1370/ton CIF India, cash. Another trader said a major PP supplier from the UAE was offering PPH raffia cargoes in the mid-to-high $1300s CIF. He said the currently higher demand is mostly for the PPH raffia and film grades.

It is not only robust buying, but also reduced supplies

“There are buyers at those levels as they think prices are on the way up. We don’t see a lot of offers from Asian producers currently as we’re very close to the CNY holidays, apart from the production issues. But there are offers from the Middle East, mostly from the UAE, which have continued to rise since early this month,” he added.

Players have resorted to inventory build-up as they fear price increasing as a result of the strength in oil prices and crimped supplies because of the continuing container crunch in Asia.

Local market to follow suit

Brent crude prices have jumped about 26% since end-November, while Asian propylene prices have risen by about 7% during the same period.

“We don’t see a solution to the shipping issue in the near future, at least not this quarter,” said the trader. “This would continue to squeeze domestic supplies and is certainly bullish for the PP markets,” he added.
A major Indian producer has kept domestic PP offers stable during the week but a trader said there could be an upward revision next week, dictated by the import market strength.

India PP imports hit a record-high in 2021

As one of the top 5 manufacturers of PP in the world, Reliance Polymers has an annual production capacity of 2.7 million tons. Thus, the local demand is largely met by domestic production.

However, buying appetite for imports has also been growing in India over the years, with 2021 imports hitting a record-high. January-November PPH imports of India moved above 730,000 tons.

(Source: Chemorbis)

Global PET bottle markets have followed a firm trend in February, driven by spiking crude oil prices. Contributing to the scene have been elevated freight rates and lingering container issues, as they provided an upper hand to sellers. The high season has yet to start in most regions, but Asian exporters have achieved good sales in key markets.

According to statistics, China is the world’s top PET exporter with a by far largest market share of 35% in 2021. Taiwan stood in second place with 10% share in overall exports, followed by the Netherlands and India with 7%. South Korea and Thailand were also important with respective market shares of 4% and 3% in global PET exports.

Export offers from China, S. Korea climb to more than 3-year highs

According to ChemOrbis weekly average data, export PET bottle offers from China and South Korea have reached their highest levels since November 2018, reflecting the buying enthusiasm and rising oil prices.
Players opined, “Tight availability amid logistic snarls coupled with the easing of Omicron concerns lent support to regional PET markets in February. These factors, as well as vivid demand from export outlets, overshadowed slightly softer spot MEG and PTA prices this week.”

Robust demand for Asian cargos in the US, Japan and Europe

Meanwhile, several Asian exporters reported that they have seen buoyant demand from major markets, including the USA, Japan and Europe this month.

Statistics suggest that the US is the number one PET buyer of the world. In 2021, imports into the US formed 18% of the overall PET imports. It was followed by Japan with an 11% share. Italy and France followed in the list as the third and fourth largest PET importers. 30% of PET imports was also formed by European countries including Russia and Ukraine, according to 2021 stats.

Although the high season has yet to kick off in many countries and downstream activities seem mild, Asian cargos have seen good buying interest across the board due to their competitive power and supply constraints in regional markets.

A trader in China confirmed lifting their export PET resin offers , citing bullish crude oil markets and tight supply in the region. He commented, “Demand across all regions has been very strong in line with optimistic expectations about a global economic recovery in 2022. Buying appetite from end-users also picked up this week in response to tight regional availability.”

“Regional and export sales to the US have been very robust. Spot buying has increased this week with more buyers returning to the market,” another seller based in China reported.

Similarly, a Thai producer reported improving regional and global demand despite the Omicron variant, reflecting that global economic recovery is on track. “Demand remains robust from Japan, our key export market, and is also very strong from the USA and Europe,” he further noted.

Southeast Asian demand is also vivid

According to a South Korean PET producer, demand in Southeast Asia is projected to remain strong during the rest of February in tandem with the lifting of lockdowns.

“Surging oil benchmarks lured buyers back to the market, which spurred rising demand from the USA, Africa, the Middle East and Europe. We also attribute the rising activity to higher shipping costs and container shortages across the board,” he said.

Limited spot availability, costs boost demand from Europe

European PET resin consumers have had a hard time reflecting their rising utility costs onto their end customers as limited supply kept the region’s spot markets elevated for another month. Meanwhile, import PET bottle cargos from North and Southeast Asia as well as India grabbed buying interest, particularly early in February due to their competitive edge.

Indeed, import offers emerged at €1400-1430/ton CIF/DDP Italy as compared to local prices at or above €1500/ton on an FD basis, before they recently rose to €1450-1470/ton.

According to statistics, Asian exporters met around 20% of the total requirements of European Union countries in 2021, while the region mostly depended on local availability. The main Asian suppliers of the region were India, China, Vietnam, Indonesia and South Korea.

PET sellers in Europe reported regular demand for this time of the year, bearing in mind that the high season has yet to start for PET applications. As for March, the possibility of delays in the arrival of import cargos coupled with the crude rally is expected to keep the market firm at prevailing levels. Players do not rule out small gains if activity picks up owing to the start of the season, however.

(Source: Chemorbis)

With less than a month to go until the start of the Chinese New Year and the opening of the 2022 Winter Olympics in Beijing, China has been facing a new wave of Covid-19, including the latest and more infectious variant Omicron.

These latest measures have not only weighed on demand inside the country but also resulted in renewed concerns regarding the global supply chain as the ports located in nearby lockdown areas have been facing congestions, backlogs, and halted operations accordingly.

China on Covid battlefield again, slowing port activities disrupt supply-chain

The northern city of Xi’an and the city of Yuzhou in the central province of Henan have been under lockdown since December 23, 2021, and January 3, respectively due to rising Covid-19 cases. Even though the number of cases is minimal, the Chinese government has issued these lockdowns as part of their strict zero-Covid policy.

On January 9, a northern Chinese port city, Tianjin, also began a citywide testing campaign of its 14 million residents. Tianjin’s proximity to Beijing has heightened the urgency, as the capital will host the Winter Olympics on February 4.

After port operations at the world’s third busiest port located in the city of Ningbo were disrupted, the Beilun district has been burdened since early January. Thus, shipping and supply chain executives are now closely observing for any potential impact on Tianjin.

Freight rates already tend to be higher ahead of the Chinese New Year due to a slowdown of activities. The renewed Covid measures are now creating an additional slowdown, exacerbating the congestion in shipping traffic and driving costs higher.

Polymer demand comes under further pressure

Demand for polymers including PP, PE, and PVC has been limited in China due to the off-season as well as buyers’ cautious stance. The market activity has already been expected to slow down ahead of the approaching Chinese New Year and Winter Olympics in Beijing, meanwhile.

Adding to the scene was the resurgence of Covid-19, even pushing buyers to start their holidays earlier than expected.

A PVC compounder in Jiangsu commented, “Buyers have reported that they are facing difficulties in moving cargoes in Zhejiang, Ningbo, and Tianjin due to the lockdowns. Manufacturers in these areas might be entering the holiday mood soon as the outbreak might take several weeks to be taken under control.”

A PP trader also said, “Many plants in Ningbo are affected by the pandemic. There are also transportation restrictions. Demand is likely to be slow due to growing concerns about rising Covid-19 cases and the Chinese New Year holiday. We think that Chinese players, especially from downstream markets, will begin the holiday as of next week.”

(Source: ChemOrbis)

January PE prices emerged with rollovers to monthly drops in Europe. Although the delayed arrival of US cargoes supported regional suppliers to some extent, growing supplies amid better import availability and tepid demand put pressure on particularly LDPE and HDPE grades.

Offers from nearby sources see discounts

Although prices for European origins have been mostly rolled over, non-European PE origins emerged with monthly drops as sellers yielded to the muted demand and improving supply levels. Weak dynamics and the emergence of more competitive offers from nearby countries put pressure on regional producers.

Supplies grow despite production disruptions

In Europe, maintenance shutdowns or other production hiccups have had no visible impact so far. Several players attributed this to the fact that producers have built safety stocks ahead of their turnarounds. Plus, stocks are higher as distributors and converters purchased beyond their needs in the previous months to minimize logistics disruptions.

In production news, Versalis shut its LDPE plant in Ragusa, Italy for a planned maintenance from January 10 to February 28, while Dow declared a force majeure on PE output following the shutdown of its cracker in Terneuzen, the Netherlands.

Buying fatigue kicks in after relentless hikes

Earlier replenishment activities and lingering holiday lull kept demand subdued in January. Apart from that, PE buyers in Europe have been overwhelmed with steep hikes in raw material prices and surging energy costs.

Rising energy costs are likely to deal a fresh blow to downstream companies, who would prefer to run at lower rates to alleviate cost burden. This may even boost exports of end products to Europe in the longer run, a few players argued.

US PE moves below European origins

Contrary to the past few months, import US PE offers currently offer a competitive edge against European origins. US prices stood slightly below the spot ranges in Italy at €1730-1750/ton DDP, 60 days for LDPE film. US HDPE film with delivery in March was offered at €1500/ton, meanwhile.

Omicron appears to be becoming the dominant variant across the board, which adds to the logistics disruptions amid trucker shortage, reduced manpower and slower port operations. Ongoing logistics backlogs curbed the import flow from the US and the arrival of these cargoes has been delayed many times. Although logistics challenges are here to stay, more US PE cargoes are awaited to hit European shores in February.

Europe preserves its charm for importers

With Europe offering the most attractive netback, it is too obvious that importers will be motivated to sell to this market. Spot LDPE prices both in Italy and West Europe still stand at an all-time high even though they came off their peaks months ago, ChemOrbis Price Index revealed.

PE prices across Europe carry a huge premium over other global markets as regional markets remained isolated due to the logistical hurdles.

As can be seen on the graph below, LDPE film prices in Italy’s local market trade at a large premium over other markets. Import LDPE prices reported in China, SEA and Turkey are on CIF, cash terms, not including any customs clearance and inland transportation costs.

Italy traditionally carries a premium over other these markets as its local LDPE prices are for prompt cargoes including all duties if applicable and delivery cost to buyers’ plants.

February calls for drops

Participants suggested that January PE deals will be mostly closed with monthly decreases, considering comfortable stocks both on the sellers and buyers’ side. Some sellers in the distribution channel are keen to reduce their stocks. The emergence of more competitive offers for non-European origins and the expected arrival of import cargoes keep the February outlook weak.

LLDPE C4 film likely to remain resilient as short mLL C6 spurs demand

Unlike LDPE and HDPE, LLDPE C4 film prices are not believed to be under a visible downward pressure due to the increased demand from mLLDPE C6 buyers. Tightness forced buyers to switch to LLDPE C4 film, which may prop up prices.

(Source: ChemOrbis)