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25 August 2010 23:59 [Source: ICIS news]
LONDON (ICIS)--South African domestic polyethylene (PE) spot values slipped by rand (R) 500-1,000/tonne ($68-136/tonne) this week for September business as at least one major local producer dropped its prices, sources said on Wednesday.
According to data from ICIS, the largest reductions were noted in the linear low density PE (LLDPE) spot market, where prices fell by R800-1,000/tonne to leave values at R11,000-12,000/tonne FD (free delivered) South Africa.
Low density PE (LDPE), widely considered the tightest of the three grades, and high density PE (HDPE) fell by ZAR500-700/tonne to ZAR11,800-12,500/tonne and ZAR11,200-12,200/tonne FD South Africa respectively.
Many local resellers lamented that these decreases would make it extremely difficult to conclude business in South Africa, as imports, which were currently on an uptrend, were becoming unworkable in the region.
⌠We are waiting for the new offers, but import prices are unworkable in South Africa now as the market is dominated by one producer, said a large trader, before adding: ⌠We can make money moving [import cargoes] into the southern Africa, but we can't make any money in South Africa any more.
While there was no comment available from the producer in question, a number of other players noted that a similar picture was emerging in local markets throughout Africa.
A large Middle Eastern seller said: ⌠Local prices have decreased for the second consecutive week because demand is very slow and availability is good, especially in Egypt. Buyers expect some increase in the import market but the current situation does not support a hefty increase.
In South Africa, several sources outlined that the intention to reduce local prices had been announced in mid-July, when the PE markets in some of the region's biggest importing areas were on a significant downward trajectory, with Chinese PE values losing $220-310/tonne from April to July.
However, just six weeks since prices hit their bottom value, Chinese PE values have gained some $100-170/tonne, as higher crude and upstream ethylene costs drew buyers back into the market.
This, in turn, has begun to shore up import pricing in the African market - which is heavily reliant on imported volumes - reversing the recent downward trend, sources said.
Despite ongoing slow demand, prices of imported material into Africa were expected to continue to rise in September, with indications from suppliers and traders ranging between $40-80/tonne depending on the grade and buyer location.
Indeed, LDPE spot prices have already climbed $20-50/tonne this week, as prices across Africa breached $1,500/tonne CFR (cost and freight) on limited supply and the threat of further increases, which brought buyers back into the market, sources said.
However, several players in the South African market were anxious that the large domestic producer in question would remain below the market level into the traditionally stronger summer season in the fourth quarter, as the producer was already said to have announced its intention to roll current prices into October.
($1 = ┬0.79, $1 = ZAR7.36)