Polypropylene to continue rising in India, Middle East until June

05-May-10

Supply constraints have propped up polypropylene (PP) prices by upto US$40/ton in the Middle East and US$30/ton in India in the past week. As per ICIS, this trend is likely to continue until June, and then reverse in H2-2010, on increased supply from new plants in the two regions. Persistently high upstream crude values and relatively stable propylene costs lent additional support to the bullish mood in PP markets. Deals have been concluded for May parcels of raffia and film grade PP at US$1400/ton CFR and US$1420/ton CFR respectively in the East Mediterranean (East Med) region, about forty dollars higher than discussions a week earlier. Supplies have been tight in the Middle East and South Asia due to a spate of planned and unplanned shutdowns. In the Middle East, Al Waha Petrochemical's PP plant in Saudi Arabia restarted after a two-week outage only late last week while Saudi Arabia’s Advanced Petrochemical's PP facility resumed full output in early April. In India, Reliance Industries' PP plant at Nagothane is expected to restart this week after an 18-day shutdown, while the company’s PP unit at Hazira resumed full production after a turnaround only in late April. India’s supply constraints are expected to ease in late May, with new capacities from Indian Oil Corp's new PP plant. PP demand in India is expected to grow year-on-year at 12-15% in 2010-11. Production cuts at PP plants in the US and Europe in April due to propylene shortages and low margins had exacerbated the supply woes in the Middle East and South Asia, although the situation was likely to improve in May.