Europe polyethylene prices at 17-month high on tight supply

10 March 2010 16:18  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS news)--Polyethylene (PE) prices in Europe have reached a 17-month high but buying sources complain that demand is flat and hikes are being forced through on supply restrictions, several said on Wednesday.

“They are squeezing the marketplace by cutting production,” said one large low density PE (LDPE) buyer.

It was LDPE buyers who were under most pressure to pay higher prices again in March, as product availability tightened further, while high density PE (HDPE) buyers began to see some opportunities of getting hold of imported product at discounted prices.

The LDPE market was particularly tight for several reasons. Some permanent cutbacks had been made in the LDPE sector in 2009 and this had not been replaced by new capacity as soon as expected. A wave of export opportunities had also helped the market to avoid oversupply, and the market was still affected by cutbacks at the cracker which had affected feedstock availability.

SABIC’s 400,000 tonne/year LDPE plant at Wilton in the UK had suffered lengthy delays and was thought to be down for maintenance at present, although this could not be confirmed. Middle Eastern plants were also slow to produce significant quantities for export.

LDPE was expected to be less affected than HDPE or LLDPE from new Middle Eastern units.

LDPE spot prices were around the €1,200/tonne ($1,622/tonne) FD (free delivered) NWE (northwest Europe) level on a net basis in March, with southern Europe reporting some lower levels.

“We are sold out for March,” said one LDPE producer on Wednesday.

A large buyer agreed that prices were high: “I was struggling to source some extra LDPE and ended up paying €1,240/tonne [delivered] for it,” he said. LDPE spot prices were at €900/tonne FD NWE at the end of December 2009.

Traders also reported a tight position but said it was tempered by slow demand.

“If you have a guy who needs your product you can impose almost what you want, but demand is bad,” said one trader.

LLDPE prices were also moving up in March but not at the same pace as LDPE. Major PE producer SABIC had made the unusual step of targeting different levels of increase for LDPE and LLDPE in March, aiming to increase LLDPE by €50/tonne, but LDPE by €70/tonne.

Much PE business in Europe was settled on a retroactive basis and so it was not yet clear by exactly how much PE prices would rise.

The only buyers who could get some relief this month would be those of HDPE, several sources said, although there was no confirmation from western European producer sources that prices had fallen significantly. In fact, some were still looking for increases in March.

HDPE spot prices were lower, however.

“I have managed to buy HDPE spot at lower prices this month,” said a buyer, “and from more than one of my regular suppliers.”

Price reductions for the time being were limited to €20/tonne. Spot prices were reported in a very wide price range, generally below €1,100/tonne FD NWE.

Another question hanging on buyers’ and sellers’ lips was how the key China market would perform, as this would have a strong impact in Europe.

Chinese buyers had not come back as expected after the Lunar New Year, but many sources expected the market to rally by the end of March, when stocks had been used up and large new capacities in Asia and the Middle East still had not provided relief for buyers in the form of excess imports.

“China will come back big time,” said a major European PE producer. “We are already seeing signs. I am really not concerned about China, and if we can sell PE at better netbacks there than in Europe, we will.”

($1 = €0.74)

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By: Linda Naylor
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