More Middle Eastern polyethylene cargoes are expected to make their way to Asia and West Africa as new capacities come fully onstream, with demand in net-short Asia projected to be able to absorb additional supply from both within Asia and the Middle East in the long run, market sources said Wednesday.
But for now, producers are looking to market to Europe because of the current slump in Asian and US prices.
This year, around 13 million mt/year of new PE production is expected to start up globally, of which more than half will come from Asia and the Middle East.
But trade participants expect actual incremental supply to be at just about 50% of the newly added capacity, or 6 million-7 million mt globally this year, as the commissioning process, stabilization and ramp-up of new plants typically take several months to complete.
Asia will see 5.89 million mt/year of new PE capacity this year, with most of the supply expected to remain within the region to meet firm demand growth, while specialty polymer grades will likely head to the US and Europe.
According to Platts Petrochemical Analytics, Asian PE demand is estimated to reach 41 million-42 million mt in 2016, up 6% from 2015, accounting for around half of total global PE demand.
PE production in Asia on the other hand, is estimated at around 18 million-19 million mt in 2016, compared with 17 million mt last year. The Middle East will add 1.36 million mt/year of capacity by the end of 2016, with the majority of incremental supply expected to continue heading to Asia.
Currently around 80% of Middle Eastern supply flows to Asia, according to source estimates.
But several traders and producers also see West Africa as a potential demand center for Middle Eastern supply due to a lack of capacity and high risks involved due to political instability in the region.
"Prices there fetch much better netbacks," a trader said, declining to reveal actual prices into West Africa.
HDPE film was last assessed at $1,135/mt CFR Far East Asia on May 11, and at $1,168/mt FAS Houston, while Europe HDPE film contract price was at $1,705/mt FD NWE.
Spot trading activities have slowed down recently ahead of the month-long Ramadan period that starts June 6, during which production operations tend to slow down, as well as high summer temperatures in the Middle East, according to a producer and traders.
