Europe PE spot prices hit lowest levels since 2010 on slow market

24 June 2011 14:05  [Source: ICIS news]

LONDON (ICIS)--European polyethylene (PE) spot prices came under further pressure this week, losing €20-100/tonne ($29-143/tonne) as slow market activity prompted several suppliers to cut their offers in a bid to tempt buyers back into the market and shift stock, sources said on Friday.

Sellers have already been forced to cut offers
significantly several times in June as the steady flow of competitively priced material from local and import suppliers continued to weigh on values, while the expectation of lower prices ahead kept buyers on the sidelines of the market.

This week, low density polyethylene (LDPE) prices registered the largest falls, of €100/tonne, leaving prices at €1,150-1,200/tonne FD (free delivered) NWE (northwest Europe), according to data from ICIS.

This brings the total reduction in LDPE spot prices for June to €130-150/tonne, as values hit their lowest levels since February 2010.

While several sellers are optimistic that values had now touched the bottom of their pricing cycle, aggressive offers in central and eastern Europe are still weighing on sentiment.

"We started the week with prices of €1,250/tonne FD NWE," one trader said. "By Monday afternoon, we were forced to re-adjust this to €1,180/tonne, and then to €1,150/tonne by Wednesday because of competitive selling in central and eastern Europe."

A second trader echoed these pricing ideas, saying that values of €1,120/tonne FD had even been heard in the market.

The source said: "It’s crazy. People are dropping their offers to try to get interest, but with buyers expecting lower prices in July it’s pointless. Our problem is we have to try and remain competitive in this market."

A producer said it could not rule out such prices: "I believe anything at this stage. Ethylene is falling like a stone in the spot market and you can find any price in the [PE spot] market. Traders and producers are offering huge discounts just to get rid of their stocks."

Elsewhere, similar trends are noted in the linear low density polyethylene (LLDPE) market, where prices also lost an additional €50-70/tonne this week, as values slumped to €1,130-1,150/tonne FD NWE, the lowest levels seen since December 2010.

A trader explained that it had been left with little choice but to cut offers to such levels to move stocks. "Sellers are undercutting just to get rid of product now. If people can offer better exchange rates, or credit lines, they do. They are using every inch they can to be more competitive."

More marginal falls were noted in the high density polyethylene (HDPE) spot market, however, where a lower starting price and thinner producer margins limited reductions.

Prices of all three grades edged closer to the €1,150/tonne mark, with film, blow moulding and injection all slipping to €1,140-1,160/tonne. HDPE injection spot prices sustained the largest reductions of €40-60/tonne, while film and blow-moulding grades lost a more marginal €20-40/tonne.

Several sellers outlined expectations that all PE film grades will edge closer to €1,100-1,150/tonne before the end of June, with further falls expected in July as a shock fall-off in crude and naphtha
figures looks likely to exert more downward pressure on the already oversupplied ethylene market.

However, there is no clear indication of when the bottom of the market might be reached.

A trader said: "People used to think that €1,200/tonne would be the bottom of the market before values hit €1,150/tonne. Now they say €1,100/tonne, but I would not be surprised if it dips below €1,000/tonne because the arbitrage [between Europe and several regions] is still wide open."

($1 = €0.70)

For more on PE, visit ICIS chemical intelligence

By: Stephanie Wilson
+44 20 8652 3214

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