Africa October PP prices fall 6-7% on competitive S Korea imports

LONDON-Copolymer polypropylene (PP) prices in eastern and western regions of Africa have fallen by an average of 6-7% in October, mainly because of an influx of low-priced South Korean offers, industry sources said on Wednesday.

South Korea has been the biggest source of relatively cheap copolymer PP grade in October, according to regular distributors of Middle East and Asian imports into Africa.

The increase in imports has mostly been in eastern and western Africa as the Asian producers have strong distribution channels in both regions.

This is supported by fresh data published by the Korea International Trade Association (KITA), which show that South Korean exports of PP increased by 33.14% year on year to 74,726 tonnes in September.

Although precise volumes into Africa remain hard to gauge, supply levels from South Korea have traditionally moved in line with price movements in the Asian producers’ key buyer market of China.

The producers are said to have increased their supply into Africa following the persistently pessimistic buying sentiment in China.

Offers from the country stand at $1,500/tonne (€1,080/tonne) CFR (cost and freight) eastern and western Africa, according to industry sources.

In contrast, copolymer PP import prices from Middle East producers into northern Africa – a region where South Korean imports are relatively low and are at higher levels of $1,560/tonne - have fallen only by around 4%.

Despite the reductions in price offers, there is slow uptake of the product. African buyers said they are waiting to see whether prices in China would continue to fall, in which case offers from Asian producers are likely to decrease again.

Many industry sources said they were bemused at the lower South Korean offers into the African spot market over the last few weeks, with some saying the gap between import offers into Chinese and African markets are closing “abnormally”.

"If I were Samsung, I would try to sell into China, and not sell it to Africa by cutting down on netback," said a PP distributor into western Africa.

“Why sell to Nigeria when the freight is $110-120. It is only $40 to China,” the source added.

A PP producer based in the Middle East said: "[It is a case of] supply exceeding demand. Koreans are offering even in Egypt at very competitive prices, putting pressure. I can't explain that, the market is under pressure, and suppliers are under pressure just to release the inventory."

The lower South Korean offers have also contributed to a narrowing gap between the normally less expensive homopolymer raffia PP grade and copolymer PP grade.

The lower import offers are also supported by a sharp reduction in feedstock propylene prices in Asia. Spot propylene prices declined by $60-90/tonne to stand at $1,270-1,320/tonne FOB (free on board) Korea the week ending 21 October, according to ICIS.

($1 = €0.72)