FocusEurope PE prices up but market nervous as imports offered

15 March 2010 14:00  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS news)--European polyethylene (PE) buyers are paying higher prices for some grades in March, but the mood remains nervous as new imports are offered and players see increases because of reduced supply rather than strong demand, market sources said on Monday.

For the first time in many months, some local producers were now differentiating their market approach between PE grades, as low density PE (LDPE) was tight and high density PE (HDPE) became more available.

“We are already sold out of LDPE for March and are implementing increases of €60/tonne across the board,” said one confident LDPE supplier, reporting gross LDPE prices at €1,260/tonne ($1,739/tonne) FD (free delivered) NWE (northwest Europe).

Net levels were reported in a wide range, hovering around €1,180-1,200/tonne FD NWE from traders, but above €1,250/tonne FD NWE for small opportunistic sales from western European suppliers. These deals were limited to the odd truck, however, as availability was very restricted.

Both converters and traders complained about LDPE, as neither party could get hold of supplementary volumes at workable prices.

“We are being squeezed by the producers,” complained a buyer, who had been caught short and forced to pay €1,260/tonne FD for a spare truck of LDPE.

HDPE was a different story, however.

“We are rolling over prices for the time being, and are able to get some increases of up to €20/tonne in some cases,” reported a HDPE producer.

The HDPE market was increasingly subject to offers of imported HDPE in March, and while spot prices had reacted to these offers, most domestic producers said they were able to sell at the same price for regular monthly business.

Smaller HDPE blowmoulding buyers were still paying net levels of €1,080/tonne FD (free delivered) NWE (northwest Europe) from their suppliers, while net levels at large accounts were more difficult to peg as many large buyers had undisclosed discounts, which sources said left prices well below this level.

“Imports to large blowmoulding buyers from new Middle Eastern plants will have to be very low,” said a trader. “We are offered some product that we can work with smaller buyers, but we can’t touch the big boys.”

Several new HDPE capacities in the Middle East which were now on stream also had production in Europe and traders did not expect to be competing with these sellers, but some re-exported product from Chinese traders was said to be offered into Europe at present.

Workable offers from China and the Middle East were so far said to be limited to HDPE, but buyers in Europe were expecting other grades soon.

“It’ll be LL [linear low density PE] next,” said a very large European buyer.

HDPE and LLDPE were the grades that were widely expected to be exported from the Middle East when production eventually got fully under way.

Most of the new production in the region, amounting to several millions of tonnes, was destined for Asian markets, but the recent slowdown in Asia left a surplus at present.

“The mood in China is not good,” said a market observer. “The market is weak.”

The direction of April PE depended on movements in the upstream ethylene market and how things developed in the key China market, sources agreed.

PE producers were generally expecting a rollover of the April monthly ethylene contract from its March level of €940/tonne FD NWE, but monomer availability was now thought to be easing as some market sources saw a lengthening of supply, which would inevitably impact on the PE situation.

“For me the biggest danger for PE now is that cracker margins lead to increased ethylene output,” said a major PE producer, who expected any overcapacity in the monomer market to be converted to PE.

PE demand was not particularly strong in 2010, and many sources agreed that price hikes in the first quarter of 2010 were due to restrictions in supply rather than good demand. 

“Repsol hasn’t idled its cracker and PE plant because the market is healthy,” said another producer, commenting on last week’s news from the Spansh PE producer.

Delegates at the ICIS world olefins conference in Brussels earlier this month heard that European players would have to cut back and even close crackers if they were to survive the new wave of capacity which would impact on polyolefins producers globally.

“I don’t know whether this make-hay-while-the-sun-shines policy is a good one,” said a seller. “The market can’t keep taking these increases and our customers accuse us of exploitation.”

PE prices had already risen by €150-170/tonne in January and February combined.

PE is used mainly in the packaging sector. LDPE and LLDPE are principally used in the manufacture of film, while HDPE blowmoulding is used to make bottles for the dairy and personal care industries. Producers in Europe include Borealis, Dow, INEOS, LyondellBasell, Polimeri Europa, SABIC and Total Petrochemicals.

($1 = €0.73)

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By: Linda Naylor
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