EPCA '10: Europe polyolefins steady, buyers aim for lower prices

03 October 2010 09:26  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS)--Polyethylene (PE) and polypropylene (PP) buyers are being faced with rollover pricing for most grades in October but they expect to be able to get hold of lower levels into the fourth quarter, market sources said ahead of the European Petrochemicals Association (EPCA) meeting this weekend.

Producers said they were supported in their aims to maintain steady polymer pricing levels by only minimal change in the upstream olefins contracts for October. However, buyers said the weakened dollar had led to increased import possibilities.

Ethylene was settled at the September level of €950/tonne ($1,311/tonne) FD (free delivered) NWE (northwest Europe), and October propylene lost only €10/tonne from the previous month, settling at €920/tonne on the same basis.

“We have already informed our sales organisation to reduce PP prices by €10/tonne,” said one major PP producer.

Others talked of a rollover for October PP pricing but they privately admitted that this would be difficult, given the decent margins now harvested for PP.

“We will start off with a rollover but minus €10/tonne will probably be the outcome,” said one producer.

PP buyers were not convinced that they would be paying almost the same price in October as September, however.

“I’m buying as little as possible,” said a buyer. “Prices won’t go up so I am working towards zero stocks.”

A distributor in southern Europe highlighted the danger from the new dollar/euro exchange rate.

“We are hearing of product being offered very aggressively now,” he said. “PP raffia is being offered at $1,300/tonne CFR (cost and freight) [Europe]. Three weeks ago that would have been above €1,000/tonne, now it’s closer to €950/tonne.”

One major PP producer dismissed such arguments:

“It is true that imports have risen from about 30,000 tonnes/month in May of this year, to 50-60,000 tonnes/month now, but these have been easily absorbed into Europe.”

PE imports were impacting some market segments, however, particularly linear low density PE (LLDPE).

“LLDPE is offered as low as €1,100/tonne for spot now,” said another distributor, reporting a drop of up to €80/tonne in recent weeks. “With the ethylene contract at €950/tonne, Europeans can’t match this.”

Low density PE (LDPE) held up better, and sellers were convinced that they would be able to maintain stability in October.

Cutbacks in production had left the market tight, but buying sources expected the two new capacities in Europe, in the UK from SABIC and in Sweden from Borealis, to increase supply in the fourth quarter.

The high density PE (HDPE) sector was in disarray.

“We don’t need imports to disturb this market,” said one producer wryly, “we can manage it easily ourselves without help from the outside.”

Demand was not bad for HDPE, but new capacity in Germany, and the inevitable increase in imported offers, weighed on market sentiment.

“HDPE is a big question market for me,” said one f the distributors. “We are seeing more and more imported material offered from the Middle East with the dollar/euro exchange rate as it is.”

Many sources agreed that the level of demand after the holidays in China would be a key determining factor for global PE and PP pricing in the weeks to come.

One major buyer summed up the current mood of the European market: “They’re starting from a very lofty position. It’s not a question of if but when.”

($1 = €0.73)

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By: Linda Naylor
+44 20 8652 3214

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