Europe polyethylene buyers count on lower October prices

24 September 2009 16:13  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS news)--European polyethylene (PE) buyers are counting on lower prices in October as more spot offers are made, despite a price hike announced by Dow last week, several said on Thursday.

“I will close September at an increase, that’s sure,” said one low density PE (LDPE) buyer who settled retroactively, “but I am sure it will be the last. I have had at least six phone calls from traders in the last two days.”

Monthly September pricing was done at an increase of up to €100/tonne due to expectations of tight availability immediately after the summer holidays, but this sentiment was fast dissipating and traders scrambled to offload product.

Most PE grades had been trading around €1,000/tonne FD (free delivered) NWE (northwest Europe) on a net basis, but spot offers were now below this.

Export opportunities, which had supported the European market so efficiently during the second quarter of 2008, were scarce, only offering possibilities for the odd special grade.

Some PE producers had said that they would wait for the October ethylene contract price to settle before making plans for PE business next month. October ethylene was done at €860/tonne FD NWE, a reduction of €15/tonne from the September contract.

“Ethylene has now become irrelevant,” said a distributor. “Everybody knows the market rules the price and now there’s enough material in the market. I am going to clean my warehouse.”

A high density PE (HDPE) buyer said: “I seem to have become very popular these past few days."

The buyer continued: “After six months of traders either having no material or very high prices, this week everyone seems to have lots of HDPE material and it is available with good discounts.”

Producers managed to maintain stability in monthly pricing during the second half of September, and even retroactive buyers did not expect to be able to avoid a hefty increase. They expected to be able to keep the market stable in October as many of them had low inventories.  

“I know buyers are expecting a big decrease, and I know that the film market is bad, but they (converters) were too complacent in September and didn’t expect this increase and now they expect us to support them,” said a PE producer source.

“We cannot allow prices to fall in October. There is no room for a decrease in profitability. Our stocks are very low. They were very low at the beginning of September and they are very low now, at the end of September. There will be no decrease,” he added. “October is going to be a fighting month.”

The producer went on to say that there would be some tough times ahead when new capacities arrived in force on the market and argued for a better partnership between producers and their converters.

“We don’t want this sort of situation with our buyers. We need to work together to find a solution,” he said.

Another producer source agreed.

“We are prepared to lose volume to avoid any hint of a price decrease in October,” he said. “In any case, industry stocks were low at the end of August and they haven’t had the chance to build up too much in September, so there is no need to drop prices.”

Sources agreed that October pricing would be a bone of contention and both sides were preparing to stand their ground.

PE producers in Europe include LyondellBasell, Borealis, SABIC, Total Petrochemicals, Polimeri Europa, Dow Chemical, Repsol, and INEOS Olefins and Polymers.

($1 = €0.68)

For more on polyethylene visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect
ICIS has launched weekly pricing reports in Africa for polyethylene and polypropylene. For more information contact Nadine Spoeri

By: Linda Naylor
+44 20 8652 3214

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