VINACHEM

African polyethylene (PE) buyers are still holding out for lower prices despite weeks of limited buying, according to sources this week.

Players in Africa have been keenly watching the Asian market for the past few months, as prices have steadily trended downwards. Falling oil prices have also contributed to a weak market sentiment.

Expecting Africa to follow a similar trend, buyers have been opting to stay away from large purchases, preferring instead to live hand to mouth and wait for further reductions.

May prices have fallen, despite concerted effort from sellers to maintain April levels. Buyers see further discounts possible, however, and are still staying away from the market.

Some sources expected the upcoming Ramadan religious festival to exert an influence on the plans of buyers but this has not proven the case. It is now too late to expect a spike in demand prior to Ramadan, as material ordered now would not arrive until after the festival.

Multiple players across various regions have also highlighted how poor the end-user demand is currently. Many convertors are currently sitting on large stocks after disappointing sales, according to sources.

Ample supplies are also available from traders, as players from across the globe have been attracted to PE arbitrage opportunities in Africa.

This general pattern can be recognised across the continent but there is some regional variation.

Many East African players are waiting for the upcoming August elections before committing to big purchases. A potential ban on plastic bags is also being discussed in Parliament, for the third time, having been defeated twice in the past.

West Africa is also experiencing some issues with obtaining physical cash, according to a source. Egypt is experiencing heated price competition from local producers.

South Africa’s demand has stagnated due to player apprehension over political issues and a stuttering economy.

With demand likely to drop in June due to Ramadan, sellers will struggle to justify anything but price drops. It remains to be seen if they be willing to lose similar margins to those seen in Asia. - ICIS -