EPCA ‘09: Europe polyolefins demand slow, concerns over Asia

04 October 2009 10:09  [Source: ICIS news]

BERLIN (ICIS news)--High prices in Europe led to the increased availability of low spot prices for both polyethylene (PE) and polypropylene (PP) at the end of September in the run up to the 43rd annual European Petrochemical Association (EPCA) meeting in Berlin.

The direction for October polyolefin pricing was not fully clear as buyers and producers saw the market situation very differently.

Some producers were announcing price increases for October in the face of slow demand and a very strong expectation of a price reduction from buyers. Most sources ruled out a price increase given the supply/demand balance and the threat of imported volumes.

Net PP prices from producers were still in the high €900s-1,000/tonne FD (free delivered) NWE (northwest Europe) for homopolymer injection, albeit settled at the beginning of September, while net low density polyethylene (LDPE) producer prices were above €1,000/tonne FD NWE for contractual business.

Spot numbers were well below this. LDPE prices were quoted at €940/tonne FD, with few takers, while PP spot numbers were lower, in the high €800s/tonne FD.

Both ethylene and propylene contracts had fallen for October - ethylene by €15/tonne and propylene by €28/tonne - but there were still two distinct camps when it came to October pricing.

“We will continue to look for increases next month. We have a very tight stock position,” said a producer.

A trader said: "These products are commodities. People buy and sell at the market price. Everybody can arb into Europe at present.”

LDPE price levels in Asia were moving down to $1,100/tonne CFR, and PP towards $1,000/tonne CFR. Duties into Europe were generally at 6.5%.

Offers of spot PE and PP were quoted at levels well below the prices done in early September, when converters paid hikes of up to €100/tonne in the hurry to ensure they got what they needed. Demand fell off sharply after this initial rush, however, and spot prices began to ease back.

“Demand had been flat this year. It still is flat,” said a PP producer. “It’s true that Europe is a very attractive option for importers,” adding perversely that it would be looking for a €30/tonne increase in October.

“There is no upward trend at all, this is clear,” countered a distributor.

While there was a general expectation of lower prices in October, few expected a repeat of quarter-four 2008, when PE and PP prices collapsed, ending the year well below their respective monomer costs.

“It won’t be like last year,” said a trader. “Last year we couldn’t see as far as January. Prices will go down, but they will be supported at a certain point by crude and naphtha.”

European PE and PP demand was still running well below 2008, with sources estimating a drop of around 10%. Production had been cut back in line with demand, leading to a situation where producers had been able to force increases onto a lacklustre market.

The direction of PE and PP in the coming months would depend largely on how the Asian market fared. If Asia came back strongly after the current holiday period, Middle Eastern volumes would flow eastwards. If Asia continued to stall, and many sources were now subscribing to this point of view, new Middle Eastern volumes would divert into Europe, despite higher freight costs.

The EPCA meeting in Berlin runs from Sunday 4 October until Tuesday 6 October 2009.

For more on polyethylene and polypropylene visit ICIS chemical intelligence
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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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