- Buyers resisted higher offers on unsupportive demand
- Market sentiment battered amid the resurgence of coronavirus fears
- A possible flare-up of the pandemic clouds the outlook
In June, crude oil prices continued its bullish run, extending a slow but relentless rise after falling into negative territory in April where NYMEX May WTI settled at minus $37.63 per barrel as triggered by a price war between Saudi and Russia coupled with sluggish demand amid the coronavirus pandemic. Despite the continuous rally in crude oil prices, SSESSMENTS.COM noted that Pakistan PE market did not show any signs of recovery in the first week of June as buyers halted procurement activities after securing sufficient volumes prior to Eid Al-Fitr holiday, which falls on May 22 and lasts until May 27 this year. During the week, a Saudi producer announced June shipment offers to the market. In comparison to a month earlier, the producer initiated a price increase of $30/ton for HDPE Blow Moulding, while maintaining a stable offer level for LDPE Film and HDPE Pipe cargoes. In the second week of June, market talks have it that a Singapore-based trader managed to finalize a deal for July shipment for Middle Eastern HDPE Film and LLDPE Film C4 cargoes at $835/ton, respectively, while transactions for HDPE Blow Moulding were heard successfully concluded at $850/ton. All offers were on LC at sight, CFR Karachi Port. Most foreign producers found difficulties to secure deals in the Pakistan market due to strong resistance from buyers toward high import offers.
Moving to the third week of the month, an Emirati producer also announced June shipment offers to the Pakistan market. As compared to May shipment, the producer applied a price increase of between $40-50/ton for HDPE Film, LDPE Film, and LLDPE Film C4 grades. Some traders reported receiving import LLDPE Film C4 offers of US origin at $70/ton higher than offers available in early June. In the final week of June, the leading Saudi polyolefins producer announced higher offers for their July shipment cargoes as compared to a month earlier. As informed, the producer initiated a price increase of between $60-90/ton for HDPE Film, LDPE Film, and LLDPE Film C4 cargoes as compared to May shipment. Considering a flare-up in coronavirus cases and volatility in feedstocks markets, SSESSMENTS.COM was informed that the majority of buyers in Pakistan were unwilling to build inventory; thus preferring to procure the materials on a hand-to-mouth basis, leading to a sharp drop in demand for raw materials.
Pakistani market players revealed to SSESSMENTS.COM that Coronavirus outbreak is still dominating as a key factor in the Pakistan PE market, with the pandemic hitting the country hard in its second wave. As noted, Pakistan started to walk the tightrope out of coronavirus lockdown despite warnings from health experts that such steps might lead to a new wave of infections and fatalities. The government began loosening its nationwide lockdown in a phased manner by allowing their pandemic-wounded business to resume operations since early May, citing the economic fallout from the pandemic crisis. However, after experiencing a resurgence in reported coronavirus cases, authorities in Pakistan announced a locality-based lockdown, which dubbed as a flexible “smart lockdown” strategy to curb the spread of COVID-19 since the country cannot afford a complete shutdown of all economic activity. Starting from June 16, dozens of localities in the Province of Punjab and Sindh have been placed under smart lockdown policy after the National Command and Operation Centre (NCOC) issued a list of 20 cities identified as Coronavirus hotspots. A recent resurgence in coronavirus infections has triggered a chain reaction of low demand in the market, with buyers retreating to the sidelines and holding back their purchases. Further added, most converters in Pakistan have been showing stiff resistance towards the higher prices as a large number of suppliers maintained their high price quotes to the market on the back of firmer feedstock prices, while big-scale manufacturers already booked some quantities at lower costs prior to Eid Al-Fitr holiday; thus not in a hurry to replenish stock yet.
On the production front, several manufacturers have seen a significant increase in demand for food and beverages, medical supplies packaging amid coronavirus outbreak, while sales for other products continue to limp along as the overall economy keeps struggling to climb out. During June, some downstream factories were running at a reduced capacity of 60-70% from the normal output. No significant supply issues were reported to SSESSMENTS.COM.
A weak performing market led to a pessimistic view among Pakistani market players. The majority of market participants believe that market sentiment is likely to remain bearish in the near term as buyers pose a strong resistance towards higher prices, given continued weakness in downstream demand. Some sources expressed that the market would largely take cues from the domino effect of forthcoming challenges due to the second wave of coronavirus infections, SSESSMENTS.COM was informed.
