Middle East Supply Cut Global Shock Waves Impact Asia Latest Quotes

Data source: Golden Alliance

As of March 13, there was no actual news that the Strait of Hormuz was passable or about to be passable. Only a very small number of bulk carriers and ships with their navigation systems turned off could pass through by chance. However, with Iran's announcement this week that it plans to deploy mines in the strait, it is expected that even these risky attempts will cease.

Supply disruptions have affected the Asian market, then the European market, and subsequently spread to the global polyolefin market. Orders from Middle Eastern suppliers have been canceled, postponed, or affected by prices.

In Europe and the U.S., some vessels en route from the Middle East will arrive in March and April, but no new cargoes will arrive in May. European producers are also panicking, as market expectations for imported supply have dropped sharply. European market prices have surged rapidly, rising by €200 per ton, and some producers are charging an additional $350 per ton for new orders. As the U.S. is also a major exporter of polyolefins, global panic has led to a surge in order inquiries from customers in Asia, Mexico, Africa, and Latin America.

Data source: Jinliancai

For the week ending March 11, the Turkish polyethylene market rose for the second consecutive week, also facing shortages of imported cargoes. A shipment from the U.S. is scheduled for delivery in April or May. Supplies from Southern Europe remain available in the market, but their prices are significantly higher than those from the Middle East or the U.S.

This week, price offers from Middle Eastern suppliers to Asia have been mixed. Most Middle Eastern traders remain silent, with polyolefin suppliers from Oman, Kuwait, and other countries failing to update their prices. SABIC, a major Saudi petrochemical company, has issued new polyethylene prices, as Saudi Arabia still has access to ports along the Red Sea coast. Its current offers to the Chinese market are: LLDPE film-grade at USD 1,250/MT, HDPE film-grade at USD 1,350/MT, LDPE film-grade at USD 1,600/MT, and LDPE coating-grade at USD 1,750/MT. However, SABIC cannot commit to any shipment timing. Although Saudi Arabia still has access to Yanbu Port on the Red Sea coast, the port’s loading and unloading capacity remains limited. Market response to Middle Eastern offers has been lukewarm; most agents report having received no offers this week, and even if offers are received, there is little willingness to take delivery, due to significant concerns over shipment schedule uncertainty and current market price levels.

Sabic not only made offers to China. It also made new offers to Pakistan, with LLDPE film and HDPE film prices quoted at $1450/ton, PP homopolymer at $1370/ton, and LDPE at $1600/ton. Moreover, on March 6, Sabic made new offers to India for PP, with PP homopolymer quoted at $1330/ton, PP fiber at $1360/ton, BOPP film at $1360/ton, and PP film at $1330/ton.

However, the important additional message is that Saudi SABIC Company is imposing a $250 per ton surcharge on goods, according to market feedback, applicable to the following goods:

1. Goods that have arrived at the port and are currently stored in a bonded warehouse.

2. Goods currently in transit (already loaded/unloaded);

Goods that have been contracted but not yet shipped.

The Vietnam Plastics Association has already held consultations, and the Vietnam Plastics Association believes that levying additional fees on goods that have already arrived at the port or are loaded onto ships is unreasonable. Because the price of these goods has already been determined in the contract signed by both parties. Some merchants in the China region have also stated they will prepare to file a complaint.

Besides Saudi Arabia, Iran's petrochemical sector also has new developments this week. Some contacts in Iran's petrochemical industry can now be reached via email. However, this is different from the situation in Saudi Arabia, as Iran is in a war zone, and the situation is more unpredictable. Nevertheless, the Iran petrochemical side has stated that the deposit must be paid within a week. However, it cannot be guaranteed whether the cargo can be loaded through the strait. Agents said that although there are new offers, they are still hesitant about purchasing.

Borealis announced new March contracts this week, with LDPE film grade quoted at 1,250 USD/ton and LLDPE film grade quoted at 1,300 USD/ton. Agents said their willingness to take delivery was weak, as shipments could not be arranged and the volume was limited, but it is not ruled out that some traders may take delivery.

Overall, this week some major Middle Eastern polyolefin producers announced new offers, but none could guarantee shipment schedules, with all reserving the final right of interpretation. To date, there has been no progress on Middle Eastern supply. China's polypropylene market has been minimally affected due to low import volumes, whereas Middle Eastern polyethylene imports account for 48% of China's total annual polyethylene imports. Buyers sourcing from the Middle East are advised to expedite efforts to secure alternative supply sources.