Europe PE prices steady despite global weakness

23 July 2010 11:48  [Source: ICIS news]

LONDON (ICIS news)--European polyethylene (PE) prices are largely stable, despite falling prices elsewhere, and producers do not expect them to decrease significantly in the coming weeks, they said on Friday.

“There is no chance of a price crash,” said one major producer, “just a slowdown in the price evolution."

“I can even see a scenario where prices move up again in September,” he continued. “Fundamentals are so strong, for LDPE [low density polyethylene] in particular.”

Another agreed: “There will be a small decrease in August, in line with ethylene, but there isn’t enough product available for prices to crash. The reduction will be modest.”

Both producers also mentioned the lack of available trucks as an obstacle to oversupply in Europe over the summer.

Traders were cautious in bringing material into Europe as any cargo would take up to six weeks to arrive, and nervous buyers dared not commit to so far ahead.

The low inventory position of most buyers also supported producers’ arguments for a relatively stable summer.

“Prices are firm because there aren’t warehouses full of polymer in Europe. There is no commercial reason why Europe should be at such a premium,” said a trader.

Imports had been slow to arrive from new Middle Eastern capacities, and those European-based producers with joint ventures in the Middle East did not have high stocks in warehouses, due to the slow start-up of several large units.

“Only platforms in Europe are now feasible, and no producer has full platforms at the moment,” said a producer with a PE joint venture in the Middle East. “People can expect lower prices but if the material isn’t physically here, they won’t get them.”

Some players were less sure of continued strength in the European PE market, however.

“We are getting bids for high density [HDPE] film in the mid-€900s/tonne [delivered] and we may consider them soon,” said another trader.

HDPE film was widely considered to be the weakest of all PE grades, and imports from new plants in Saudi Arabia were offered into Europe. Prices from European producers were still above €1,000/tonne FD (free delivered) NWE (northwest Europe) in most cases but a downward trend was expected in August.

Asian HDPE prices were very low, at $1,000-1,050/tonne CFR for film grades, and sources questioned how long such a differential could last before Europe was flooded with imports.

Several commentators felt that an upward price move in Asia was more likely than a significant downward move in Europe, however.

“Look at those Asian prices,” said one commentator. “They are certainly not making much money at these levels. Naphtha and crude are firm and PE prices in Asia are weak.”

Whatever the outcome of August monomer discussions in Europe, players on both the buy and sell side were cautious, and this caution was expected to continue well into September. The market was coming from a scenario where PE prices had risen by up to 30% in six consecutive months in 2010.

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

($1 = €0.78)

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By: Linda Naylor
+44 20 8652 3214

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