Europe PE producers prepare for weak December

27 November 2008 17:29  [Source: ICIS news]

LONDON (ICIS news)--Polyethylene (PE) producers in Europe are cutting back in an effort to manage inventories ahead of what they expect to be a very poor December, several market sources said on Thursday.

“We expect December PE volumes to be around 20% of a normal month,” said one PE producer who was cutting back to 80% of capacity.

This was still considered to be a high rate under the current circumstances, but some suppliers were still forcing contractual ethylene onto their customers.

Other producers agreed that December would be a poor month.

“Our converters are closing for longer than usual over Christmas. Several have already informed us that they will be down for three weeks, so we just have to cut back,” said another producer.

SABIC announced this week that it would be reducing PE production by 30-40% in December.

Other producers did not want to publicly give operating rates, but most reported that they were running reduced rates of around 25%.

“The picture is not completely dark at present,” said a PE producer. “We have seen a gradual recovery since early November. We are not on target but demand has been a bit more normal these past few days.”

Inventory levels were low along the chain and buyers said there was little incentive for them to buy a gramme more than they needed as prices would not be increasing in the short term.

Many also reported weak order books.

Most producers expected to continue running at reduced rates throughout January.

Estimates of year-to-date volumes for PE differed widely. All sources agreed that volumes were significantly down compared with 2007, but producers estimated losses to be at 10-15%.

The first-quarter ethylene contract would see a big drop, sources said, falling as much as €500-600/tonne ($641-769/tonne) for the new ethylene contract.

The fourth-quarter monomer contract was considered artificially high by most PE players, at €1,120/tonne FD (free delivered) NWE (northwest Europe).

PE producers said they did not intend to give away next quarter’s ethylene drop as they had relinquished so much in the fourth four.

Low density polyethylene (LDPE) monthly prices were not yet fully settled for November, but prices were down by close to €400/tonne.

LDPE spot was trading in the mid-€600s/tonne FD NWE on Thursday.

December LDPE prices have already showed indications of dropping by another €150/tonne, but December business was so far very thin.

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 polyethylene margin report
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By: Linda Naylor
+44 20 8652 3214

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