New LDPE capacities coming in the midst of weakening prices

26-Apr-12
Two new LDPE plants are slated to come onstream in the Middle East in June, according to market sources. As the scheduled start-up dates draw near, some players have started to voice their opinion about the prospect of the LDPE market, arguing “The extra availability may put pressure on LDPE prices as these plants are coming online at a time when prices have already turned down.” Qatar Petrochemical Company is planning to start up its new 300,000 tpa LDPE plant at Mesaieed by the end of June while Saudi Kayan is set to commission its new LDPE plant with the same capacity in June as well. In general, LDPE prices followed a firming trend across the globe as of the beginning of 2012 until a short while ago, as per ChemOrbis. All the same, this upward trend mostly stemmed from the bullish support from the cost side, rather than good demand dynamics. Global demand has been hit by widespread economic woes. Before the debt crisis in Europe had a chance to cool down, poor results for economic indicators have started to show up in Asia, particularly from the regions’ emerging-market growth engines, namely China and India. LDPE prices in China, for instance, did not post increases as large as they did in other regions because of unsatisfactory demand. The overall buying appetite of Chinese players has been affected by the slower economic growth as a result of the earlier tightening monetary policies put in place to tame inflation and prevent a bubble in the property markets. Now, the outlook in the PE markets has started to weaken, as per ChemOrbis. As can be seen from the graph above, import LDPE film prices to China and Southeast Asia have already lost some ground with overseas and regional producers lowering their May offers. In other markets, the sentiment has shifted downwards as well. Reversal expectations are widely pronounced in Italy while some lower import LDPE prices have already emerged in Egypt. Some sellers are concerned that the new plants may result in oversupply amidst already weak demand. On the other hand, other players opine that the impact of these two new capacities will not be imminently visible in the LDPE market as these plants will undergo some trial runs in the first few months of their operations.
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