FocusEurope PE market uncertain amid widespread speculation

12 October 2009 12:26  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS news)--The European polyethylene (PE) market is jittery due to a number of factors that are leading to widespread speculation, sources said on Monday.

Uncertainty was rife around the question of imported material and how much was currently on offer; the direction of November ethylene, as the expected downward move would inevitably affect PE pricing; the date when new capacities would have significant quantities of material for delivery to Europe; and the direction of the Chinese PE market now that holidays were over.

The uncertainty led to low inventory levels across the board and hand-to-mouth buying was prevalent. Producers were fairly confident that prices could not slide in October, however.

“Inventories are low. The supply/demand balance is good. There is no room for prices to slide in this sort of environment,” said one producer.

Production remained reduced throughout Europe. Crackers were estimated to be running at 85-90%.  

Tales of imported product began to circulate in Europe, but most material that was available was for November delivery. Small quantities of LDPE were reported offered into Europe at $1,200/tonne CIF (cost, insurance and freight). 

There were some quantities available in Antwerp but these were limited and offered at price levels not low enough to attract European buyers who were also beginning to consider their end-year volume rebates.

An offer of low density PE (LDPE) at €890/tonne ($1,309/tonne) CFR (cost and freight) Antwerp was not low enough to attract buyers who would benefit from extra rebates from their regular producers if they reached the agreed volume target level by the end of the year.

LDPE net prices in Europe were reported at €950-970/tonne FD (free delivered) NWE (northwest Europe).

The large quantities of imported PE from new capacities in the Middle East had still not reached European shores, and a revival in Chinese buying after the holidays was expected to delay the onset of material into Europe even further, said sources.

There were signs that China was back in the market for big volumes of PE on Monday.

“[European] customers are sitting on their hands again. I can understand that, but it could be dangerous. They might not be able to get what they need,” said one major PE producer, who reported a sharp upturn in demand from China on Monday.

“We have sold LDPE into China today and we have demand for LLDPE,” he said.

Buying interest from China on Monday followed an initial flurry on Friday 9 October, which encouraged sellers to expect a strong October.

Some market sources were not necessarily expecting a strong end to 2009, however.

“There is material coming on stream in China and the Middle East. Okay, they are buying for October, but who will buy beyond November with all the new stuff coming on stream?” asked a trader.

“Suppliers must not jump the gun and increase sharply when they see China buying, or else it will collapse again as customers will buy now, then hold off,” the trader added.

For now, significant imports of material into Europe from new Middle Eastern capacities were limited to ethylene.

At least two parcels of ethylene from the new Rabigh, Saudi Arabia, plant were reported to be heading to Europe. One 4,500 tonne lot was said to be loading 23-27 October, destined for Romania. Another, so far undisclosed, volume was reportedly heading into northwest Europe. Meanwhile, a 9,000 tonne vessel was heading to Asia, loading 10-15 October.

No prices were disclosed, but sources pegged them generally in the low €600s/tonne CIF NWE/Med. Others indicated prices within a narrower €610-625/tonne CIF NWE range. Buying interest for November was talked as low as $850/tonne CIF NWE/Med. Traders expected the downward trend to continue through until the end of the year.

Buying sources were well aware that the upstream weakness in ethylene would affect PE pricing, adding to pressure to buy only necessary volumes.

PE producers did not see the weakness of ethylene as a wholly bad thing, however.

“As long as we can keep the spread between ethylene and PE, we will be happy,” said another major PE producer.

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
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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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