Europe PE falls on lower ethylene prices

05 August 2010 16:02  [Source: ICIS news]

LONDON (ICIS)--Polyethylene (PE) prices in Europe are moving down following the recent €18/tonne ($14/tonne) drop in the August ethylene contract price, but opinions are divided as to how long the erosion will last, market sources said on Thursday.

“We are reducing prices for August - something we thought we could avoid - but I don’t think this will last for long. I can see it turning around again in September,” said a major producer.

Low density polyethylene (LDPE) remained the strongest of all PE grades, but a wide range of prices was heard in the spot market in particular.

LDPE prices in the UK and Poland were heard as low as the equivalent of €1,150/tonne FD (free delivered), but it was not clear how many sellers were willing to meet bids at this level.

“We have had to walk away from business in Poland. Price ideas are just too low,” said another producer who was not willing to sell LDPE for below €1,200/tonne FD on a net basis.

Net LDPE prices were trading above €1,300/tonne FD NWE (northwest Europe) in some cases in June.

Rising Asian prices also led to expectations of export possibilities after a period when exports from Europe had all but dried up, because of the lack of available product from Europe, but also unworkably low prices in Asia.

The linear low density PE (LLDPE) market was also easing back, by slightly more than the ethylene drop of €18/tonne, but buyers pointed out that margins were still good for producers.

“Cracker and PE margins are good. They can afford to give something back after months of increases,” said one buyer.

Average July integrated margins were now at their highest level since their peak at the end of 2008, according to the ICIS weekly PE margin report.

High density PE (HDPE) was not as strong as LDPE, and players were speculating about how much prices would fall in August.

HDPE film grades were affected by imports, and sources saw prices falling by around €30-40/tonne so far for August, after a similar drop in July. Bids were now below €1,000/tonne FD NWE.

HDPE injection and blow-moulding grades were firmer, as the demand pull remained steady in Europe, and so far only the €18/tonne drop in the ethylene contract price was confirmed for August.

The absence of many buyers because of holidays would mean that business could take longer to settle this month, sources agreed, and the outcome would not be fully confirmed before well into the month.

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

($1 = €0.76)

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By: Linda Naylor
+44 20 8652 3214

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