African polyolefins markets to see further recovery in 2011

2011 is set to be another year of recovery for the African polyolefins markets following a better-than-expected 2010, although further volatility in terms of price, demand and supply remains a possibility, as per ICIS. After a dip in prices in mid-2010, many grades of polyethylene (PE) and polypropylene (PP) are now at year-highs or at least back to where they began the year, creating a strong footing for sellers to continue raising prices in 2011. January is likely to get off to a strong start. Producers offering into Africa in December announced higher PE and PP prices, citing strong crude futures and the healthy pull for volumes from China as buyers look to restock ahead of the Lunar New Year. Many producers also expect that, on top of strong demand from Asia, the African PE and PP markets will grow by some 10-15% overall in 2011, providing further scope to increase prices. Outside of the more established South African and Egyptian markets, western Africa – specifically Nigeria an Ghana – was cited as the fasted-paced markets in terms of growth for polyolefins, proving a good potential off-take for sellers offering into the region. Nigeria is expected to grow some 7.5% in 2011, eastern Africa will improve 4-5% and regions starting from very low levels will be even higher, such as Ethiopia, which will grow by 11.5% in 2011. The region has very few producers, with most and the vast majority of what is produced is consumed locally. There is a shortfall in supply that will only continue to grow because it remains expensive to produce in Africa outside of the developed countries. A source highlighted that the average African consumed some 400 gm of plastic annually, compared to the 50 kg per person consumed in the US and the 25-30 kg consumed in Europe. Product availability is to outpace demand in Africa in 2011 as Middle Eastern players continue to expand capacity and look to place volume into the African market. The massive capacity of PP coming onstream in the Middle East is expected to begin impacting on African prices as early as end-Q1 2011. The potential increase in supply from the Middle East also led to some debate over the sustainability of the upward trajectory of African polyolefins prices. Many consumers and a number of sellers remain adamant that hikes were driven by the limited availability rather than any significant rebound in demand over the last year. If the netbacks in Asia or Latin America are more attractive than they are in Africa, Middle Eastern suppliers will move product there, so availability from the new plants will depend on wider market too.