COMMODITIES 2025: Middle East PE, PP markets set to remain weak in H1

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

The outlook for Middle Eastern and Turkish polyethylene and polypropylene markets is pessimistic for the first half of 2025, with market participants expecting weak demand, oversupply and pricing pressures to continue.

Market sources across the Middle East and Turkey report weak demand for both PE and PP products. Many buyers are adopting a cautious approach, purchasing only on a need-to basis, and delaying large-volume commitments in anticipation of further price declines, market sources told S&P Global Commodity Insights.

This sentiment is echoed by several traders and producers who noted that end-users are hesitant to build inventories amid economic uncertainties and expectations of lower prices, as new capacities come on stream across Asia and the Middle East.

Oversupply and price pressures persist

Oversupply continues to weigh on the markets, exacerbated by increased imports of PE and PP from the US into the Middle East and Turkey markets at competitive prices.

"The US is the way to go if you're not in a rush," said a Turkey-based trader, adding that "HDPE from the US is at a lower level than from the Middle East, Russia, Saudi Arabia, and Qatar."

New capacities in Saudi Arabia and potential entrants like Dangote in Africa are contributing to the oversupply concerns.

Key projects in Saudi Arabia include Advanced Polyolefins Industry Co.'s new 800,000 mt/year PP plant, which is expected to come on stream early 2025; Sipchem's Al-Waha expansion, which will add 150,000 mt/year of PP capacity by Q4 2026; and a joint venture between LyondellBasell and Alujain, which will target 500,000 mt/year of PP capacity by mid-2026. This will bring a total of 1.45 million mt of new PP capacity to the market over the next few years.

Saudi PP exports on the other hand have already been lower, dropping by 17% year-on-year to 3.584 million mt during January-July 2024, according to analyst data from Commodity Insights.

Economic challenges dampening consumption

Economic factors such as high inflation rates, currency fluctuations, and high interest rates are seen hurting consumer spending and industrial activities well into 2025, leading to reduced demand for PE and PP products.

"Bank rates are still high; the Central Bank should drop levels down," another Turkey-based trader said, referring to Turkey's key interest rates being raised to 50% by the country's Central Bank in March in a bid to combat the inflationary pressures. Turkey is a key export destination for Saudi Arabian polymer producers.

The situation in Turkey is compounded by regulatory changes and geopolitical tensions, which are affecting both domestic consumption and export activities. "Especially for the Turkish market, the signs are not so good; demand is not good, prices are coming down," a third trader said.

Logistical challenges, including longer lead times and uncertainties due to geopolitical tensions, are also influencing buying decisions and market sentiment, and the sentiment is likely to spill over to 2025, according to market sources.

Outlook for H1 2025

Market participants generally do not anticipate significant improvements in demand or pricing in the first half of 2025. The consensus is that the oversupply situation, combined with weak demand and economic headwinds, will continue to exert downward pressure on the PE and PP markets.

"Prices are still dropping. From what I see, there was a drop, and I think it will keep on going until the end of January or the beginning of February due to restocking," said a producer.

Some optimism exists for a potential demand uptick post-Q1 2025, but this is contingent on economic improvements and resolution of current market challenges.

Market players are adopting a cautious stance, closely monitoring economic indicators, and geopolitical developments. Until significant changes occur in the demand-supply dynamics or economic conditions improve, the markets are likely to remain under pressure.