May PE talks begin with lower prices now expected

01 May 2008 15:22  [Source: ICIS news]

LONDON (ICIS news)--Europe polyethylene (PE) buyers were reporting lower prices despite record high upstream costs as May discussions got under way, players said on Thursday.

 

“We are facing competition from producers with product to offload,” said one European distributor.

 

Low density polyethylene (LDPE) sellers had initially expressed hopes of higher prices in May. Dow announced a €50/tonne ($78/tonne) hike for all its May PE, but it was clear that price increases were not going ahead.

 

“It’s now a question of whether we will get a rollover or a reduction,” said one buyer.

 

Linear low density polyethylene (LLDPE) was still looking firm and buyers generally expected a rollover, in spite of public talk of higher prices from producers.

 

High density polyethylene (HDPE) was widely acknowledged to be the weakest PE category and buyers expected lower prices in May. HDPE blowmoulding was stronger than other grades, however, and one smaller producer reported that April had seen its best volumes so far in 2008.

 

HDPE was particularly affected by imported product, while re-sellers complained that extra volumes of LDPE were offered from EU producer sources, upsetting the balance of this market.

 

Lower LDPE prices were already seen in some regions for May but much business was still to be settled for the month. Levels were now talked at €1,290/tonne FD (free delivered) NWE (northwest Europe) on a gross basis, while April prices settled around €1,310-1,320/tonne ($2,046-2,062/tonne) FD NWE.

 

“It is true that price decreases are limited but against the backdrop of record high oil and naphtha, and an increase in first quarter ethylene, they are scary. Margins are moving into scary zones,” said one PE producer.

 

“Demand is not at all bad but costs are very high. Our costs have increased by over 30% over the past six months but PE prices have been moving down,” said another producer.

 

Most production was running normally in Europe, and export opportunities were hit by the weak dollar.

 

INEOS Polyolefins’ 320,000 tonne/year LLDPE/HDPE swing plant in Grangemouth, Scotland, was still out of action after a two-day strike which brought the whole refinery site down but no other major production issues were reported.

 

One major producer felt that a turnaround could be on its way, adding prices could not continue to slip against such a strong upstream situation.

 

“I can see some signals, not necessary in the next two or three week but on the horizon, where there will be a dramatic U-turn in the PE market. I feel it in my bones,” the added.

 

For the time being, however, the market was living on its nerves.

 

Meanwhile, second-quarter ethylene had been settled up by €15/tonne, at €1,038/tonne ($1,621/tonne) FD NWE. April PE prices also slipped, and some observers felt it was time to start cutting back at the cracker level, if producers’ margins were to improve.

 

Brent crude oil had currently dipped back down to just above $111/bbl, after a high just shy of $120/bbl earlier in the week.

 

PE producers in Europe include Saudi Basic Industries Corp (SABIC), LyondellBasell, Borealis, Total Petrochemicals, INEOS Polyolefins, Dow and Repsol.

 

($1 = €0.64) 

 

For more on PE visit ICIS chemical intelligence

 

By: Linda Naylor
+44 20 8652 3214

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