Does PP demand signal for an improvement in Egypt?

PP demand in Egypt has been performing poorly, partly as a result of the political turmoil in February as well as the persistent increases in the local and import markets since the beginning of the year, as per Chemorbis. Regional producers’ offers have been following an upward trend since the beginning of 2011 as Middle Eastern PP raffia prices gained over US$300/ton since then. For May, regional producers elected to issue increases of US$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 slack global trend amid the fact that regional producers mostly announced rollovers to decreases to China for May. In the local market, PP producer OPC has been hiking raffia prices since the beginning of the year, with cumulative hike amount reaching EGP2590/ton (US$436/ton). The producer has been pointing to higher feedstock costs as well as disrupted feedstock propylene deliveries from Libya, where the political unrest continues. The producer, who issued EGP300/ton (US$51/ton) increases for May, also sources some 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 €175/ton (US$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 US$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 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 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 improving end product demand while another said that they were pleased with 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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