Europe PE prices drop on continued weak demand

20 November 2008 16:27  [Source: ICIS news]

LONDON (ICIS news)--Polyethylene (PE) prices in Europe are still falling fast on the back of continued weak demand as new plants come onstream and buyers are waiting for further price drops, market sources said on Thursday.

Spot low density polyethylene (LDPE) prices fell at a historically fast rate and were now at their lowest since January 2004.

“The current situation is simply unbelievable,” said one major PE producer. “The volumes are just not there and I am seriously concerned over December.”

LDPE spot prices were now half their July level, at €750/tonne FD (free delivered) NWE (northwest Europe), and converters expected lower prices in the weeks to come.

Demand was weak and new capacities were on stream, affecting the European PE market. Demand was also heavily impacted by recessionary factors which led to hand-to-mouth buying along the chain.

October proved to be particularly slow and sources estimated that year-to-date volumes for PE were now more than the 8% down compared with 2007.

“There is no incentive for people to buy. Everybody expects a huge reduction in quarter one ethylene and they expect this to lead to still lower PE prices,” said another producer.

“You offer buyers a really good spot price, and they simply say thanks for the information but they don’t buy,” said one frustrated trader.

Credit availability was also a growing problem.

“Three of my customers have had their credit lines pulled this week,” complained a distributor.

There was growing mistrust on both sides as some converters questioned the viability of highly-leveraged producers.

Imported offers were rife, and European producers also added their own spot offers to match these.

“All sellers are putting an emphasis on volume and there doesn’t seem to be much market structure any more,” said one buying source.

New capacities of all grades of PE were now coming on stream in the Middle East and there was more to come. European producers were running plants low, and expectations of some plant closures in Europe were high to make room for the onslaught of new material due on stream.

Imminent new capacities include Arya Sasol’s 600,000 tonne/year plant in Assaluyeh, Iran during the fourth quarter; Saudi Ethylene and Polyethylene CO (SEPC)’ 800,000 tonne/year PE plant in Al Jubail in November’ Rabigh Refining and Petrochemical Co (PetroRabigh)’s 900,000 tonne/year PE plants in Saudi Arabia at the end of 2008, and Saudi Basic Industries Corp (SABIC)’s 400,000 tonne/year LDPE unit at Wilton in the UK early 2009.

“Old assets will have to be closed and we need to improve our product portfolio to meet these challenges,” said a major European producer. “We will need to work closely with our customers to create additional value for both ourselves and our customers.”

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

($1 = €0.79)

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By: Linda Naylor
+44 20 8652 3214

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