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Does PP demand signal for an improvement in Egypt?

https://www.chemnet.com   May 10,2011 CHEMORBIS
In Egypt, PP demand has been performing poorly partly stemming from the political turmoil in February as well as the relentless increases materializing both in the local and import markets since the beginning of the year.



Regional producers' offers have been following an upward trend since the beginning of 2011 as Middle Eastern PP raffia prices gained over $300/ton since then. For May, regional producers elected to issue increases of $10-22/ton on CIF Egypt, cash equivalent basis as they were under upward pressure at the start the month from higher local market levels. The increases, however, were comparatively humble due to the globally slow trend and given the fact that regional producers mostly announced rollovers to decreases to China for May.



When looking at the local market, the local PP producer OPC has also been raising their raffia prices since the beginning of the year, with their cumulative hike amount reaching EGP2590/ton ($436/ton). The producer has been pointing to the higher feedstock costs as well as the disrupted propylene deliveries from Libya, where the political unrest continues, as they procure some of their feedstock from this country. The producer, who issued EGP300/ton ($51/ton) increases for May, also obtains some of their propylene needs from Europe, where the contract prices for this particular monomer have been on a bullish run since the start of 2011 with prices moving up by ?75/ton ($260/ton). Plus, due to OPC's European propylene supplier's 2-3 week maintenance, the producer's PP production is expected to be affected in the upcoming days. This situation is another justification for their most recent price hike decision.



However, following OPC's May hike, distributors' prices did not change much through the last working day of last week as they were still traded at a discount of $92-122/ton with respect to the local producer's new prices. Plus, locally held offers do not carry a healthy premium over imports, despite their prompt availability advantage.



This situation stems from the weak demand as most distributors elected to maintain their prices during this past week despite the clear upward pressure coming from both OPC's and the Middle Eastern producers' higher prices.



However, at the end of last week, some buyers reported increasing their operating rates while some mentioned running their plants at full capacity. These converters were highlighting the fact that their end product demand has improved noticeably and they feel pleased with their current sales performance. One of the converters reported starting to purchase more than their needs in line with their improving end product demand while another said that they were pleased with their end demand and are running at full rates. One converter commented, "Our products are experiencing a noticeable improvement and accordingly we raised our operating rates." The fact that the local prices have not yet been affected by the higher prices from producers has also helped to increase buy interest on the part of converters.

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