18 April 2011 15:21 [Source: ICIS news]
LONDON (ICIS)--Low density polyethylene (LDPE) prices in Europe have slipped from their record highs of above €1,500/tonne ($2,174/tonne), but market players do not expect values to crash as crude oil and naphtha prices remain high, several sources said on Monday.
Spot LDPE prices are now at €1,450–1,500/tonne FD (free delivered) NWE (northwest Europe), down from their record highs of €1,500–1,530/tonne FD NWE, which were seen in some cases in March.
A couple of buyers even quoted some spot lots offered by European producers for April delivery at €1,420/tonne FD NWE, but this was not as prevalent in the market.
Monthly LDPE prices are stable to slightly higher. Producers are aiming to recover the €10/tonne increase in the April ethylene monomer price. While some buyers had been forced to accept a €10/tonne increase, others have simply refused to entertain any increases at all.
According to a polyethylene (PE) buyer, the unrelenting upward pressure on prices is about to change. “It’s time to get out of stock. [Producers] are flying in the face of reality.”
LDPE prices have risen steadily since the end of 2009, when they were at €900/tonne FD NWE, with only very limited periods of relief thereafter.
LDPE supply in Europe has been particularly tight as a result of the permanent closures of several old autoclave units in the region in 2009. Since then, new production units have been mainly dedicated to high density polyethylene (HDPE) and linear low density polyethylene (LLDPE).
The supply situation is now easing. Buying from China is lower than expected, and European production is running well.
Polimeri Europa’s 200,000 tonne/year LDPE plant at Dunkirk, France, is still not on line following several delays to its restart after a prolonged planned shutdown, which began in the middle of August 2010. Output is expected to begin imminently.
“The Dunkirk plant will tip the balance of the market,” said the PE buyer. Even keen buyers such as this one do not expect prices to crash.
A trader said: “Crude won’t be moving down soon with what’s happening in the Middle East. I see more turmoil coming up from there rather than the opposite.”
Brent crude prices slipped on Monday but were still high, trading at $122.56/bbl around 11:00 GMT. In euro terms, they were not far from their record high in July 2008.
“Some producers are beginning to have some stock to move,” said another PE buyer, “but they will have to price it at a workable level.”
Many buying sources said they expect prices of all PE grades in Europe to slip by the second quarter because of imports. Much of the imported material consists of product from China that is re-exported via the Middle East. Most imports are expected to arrive in May or June, with the amount of product to be shipped difficult to gauge.
“I’m not sure how much material is coming back from China,” said another trader. “No trader has the guts to take serious volumes.”
Some end-users said they are buying product directly.
“I won’t have to buy from Europeans in June. All my volumes will be from imported sources,” said another large buyer.
It remains to be seen the extent to which imports will affect the European market. For April, monthly PE pricing has been stable to higher, with only minor price reductions in the LDPE spot sector.
PE is used extensively in food packaging, household goods and, in the case of LLDPE and LDPE, the agricultural sector.
($1 = €0.69)
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