Europe sellers invite PE bids as prices slide

23 October 2008 17:11  [Source: ICIS news]

LONDON (ICIS news)--The polyethylene (PE) market in Europe is so weak that some sellers are inviting bids from their buyers to be able to sell their volumes, market sources reported on Thursday.

“It’s impossible to pin down a price level for low density PE [LDPE] at the moment,” said one trader. "You just have to ask for a bid and see what you can do."

Spot LDPE has fallen €50/tonne ($64/tonne) to €1,100/tonne FD (free delivered) NWE (northwest Europe) this week, and buyers expected further decreases throughout the month.

Global LDPE prices had also fallen sharply, and European prices remained the highest in the world, attracting offers from other stricken areas.

Asian bids for LDPE were now below $1,200/tonne CFR, the equivalent of €936/tonne and below. US export prices were at a similar level.

European spot LDPE levels were now below the fourth-quarter ethylene contract price of €1,120/tonne FD NWE.

Cracker operations were cut back, often to technical minimum levels, but low naphtha prices meant that cracker margins remained at the decade's peak.

Naphtha was reported in a range of $430-440/tonne CIF NWE on Thursday, leaving the spread between naphtha and the ethylene contract price very wide.

Spot C2 had begun to soften significantly but openly-reported ethylene spot deals were rare, and spot prices were assessed below contract at €600/tonne on the pipe.

It was not only feedstock costs which affected the PE market in Europe, however, but weak demand. 

This stemmed from beleaguered downstream markets and also fears of paying prices which would soon be considered too high. Increasing restrictions on credit availability was considered central to the current situation.

Producers accepted that they had to pass on some of their advantage gained by lower naphtha prices to their customers, despite the fact that numbers offered were now lower than the fourth-quarter ethylene price.

“Our customers are suffering. We are prepared to do special deals to help them compete in their markets,” said one major producer.

Another confirmed spot business of €1,100/tonne FD NWE for volumes of 1,000 tonnes or more.

“We can’t do that for small buyers, but if larger ones can take it, we can do that sort of price,” it said.

Some buyers had little sympathy for producers.

“They have had three years of excellent margin, they have to think of us now or they won’t have a market to sell to,” said one buyer.

There was no end to lower prices in sight. Sources felt that stocks along the chain were low, but that they did not expect any imminent pick-up in demand.

“The only way we can turn this situation around is by cutting a couple of crackers,” said one producer.

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

($1 = €0.78)

Click here to find out more on the European margin report
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By: Linda Naylor
+44 20 8652 3214

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