Mideast polyols market shrugs off new supply from Sadara

Polymer polyols market players in the Middle East have largely taken in stride new spot supply from Saudi Arabia’s Sadara Chemical, expecting no major market impact despite weak demand conditions in the region.

Sadara started this week sales of polymer blended polyols (POP) to customers in the Middle East.

On 22 August, spot import prices of 10-13.5% POP drummed cargoes in the Middle East were stable for the fourth straight week at 1,550-1,650/tonne CFR (cost & freight) Middle East.

Some suppliers had increased their offers slightly to account for the increased pressure on their profit margins arising from prices of propylene oxide (PO) in Asia.

But these suppliers admitted to struggling to connect with buyers at higher offers.

As such, prices in the market remained unchanged this week despite expectations that additional supply from Sadara could weigh on prices in an already weak demand environment.

“Many of the [Middle East] market players have just come back from holidays,” said one Asian source. “Not many are actively discussing right now.”

Sadara started polyols production in 2017 but was previously only producing conventional grade polyols.

But even then, most market players knew given Sadara’s relationship with US-based Dow and the price premium that polymer polyols commands over conventional polyols, it would only be a matter of time before the Saudi company would start producing POP.

Sadara is 65% owned by Saudi Aramco and 35% by Dow.

The POP material offered by Sadara contains polymer contents of 10%, 15% and 25%, which are the most commonly used grades in the Middle East, according to market sources.

Conventional polyols are typically priced lower by about $50/tonne than POP on aCFR Middle East basis in the absence of any deals, market sources have said.

But other market sources said the gap could widen to $100/tonne on a CFR basis during times of strong demand for POP.

Some suppliers, however, did raise some concern about the added supply given the Middle East polyols market is already extremely competitive.

“It could be bad news,” said one Asian supplier, referring to the new POP supply from Sadara.

Demand for polyols has been generally soft in line with the price trends of co-components such as toluene diisocyanate (TDI) because of poor downstream demand by flexible foam end-users in the region.

Polyols are combined with isocyanates to manufacture polyurethane (PU) foam products such as mattresses and insulation panels.

Sadara’s other products include ethylene, propylene, ethylene oxide (EO), butyl glycol (BG), amines, propylene oxide (PO), propylene glycol (PG), polyols and isocyanates.