Europe polymer spot prices stabilise after sharp falls

18 July 2011 15:21  [Source: ICIS news]

LONDON (ICIS)--Sentiment in the European polyethylene (PE) and polypropylene (PP) spot market has started to turn in recent days, with prices now showing signs of stabilising after dramatic reductions, players said on Monday.

After falling to some of the lowest levels since January 2010, the majority of European PE net spot prices had now steadied at around €1,100–1,150/tonne ($1,549–1,620/tonne) FD (free delivered) NWE (northwest Europe) depending on the grade, according to ICIS, as the market hit what most considered to be the bottom of its pricing cycle. 

Rising Asian prices and eroding cracker margins mean that imports into Europe are dwindling, while domestic production is also being cut, eradicating some of the oversupply in the market.

“Our spot availability is drying up,” said one high density polyethylene (HDPE) producer, before adding: “There is a clear change of trend.”

This was echoed by a producer of low density polyethylene (LDPE) – the grade that had become arguably the most freely available in several regions – who said: “There has been a sharp decrease in our stock availability because of our export activities.”

Similar sentiments are echoed in the European PP spot market, where traders said they had seen their best sales volumes for weeks.

However, import pressure on PP remains apparent, as spot prices stick at levels largely above the €1,100/tonne mark seen on the PE market, enticing foreign sellers into Europe and leaving some players wary that PP prices still have further to fall while the arbitrage for imports is still open. 

A PP trader said: “It has been much more positive in the last week, but I am hesitant to believe that spot prices will really start picking up before we reach similar prices to those coming out of Asia and the Middle East.”  

However, after weeks of limited activity and delayed purchasing in anticipation of lower prices in both the PE and PP markets, this change in sentiment alone has brought some buyers back into the market.

According to several sellers, consumers are now scrambling to secure the cheapest possible spot deals – and rebuild stocks ahead of the holiday season.

One LDPE manufacturer said: “Customers are trying to anticipate the trend and are buying-up product. We are at the bottom of the market.”

Spot prices in either market are yet to post any significant gains, but producers remain optimistic that the upswing in sentiment and lower operating rates will allow them to stave off further reductions in the contract market, where decreases of €95–100/tonne have already been posted across PE and PP prices in July.

However, most believed that it would not be possible to achieve any significant increase in either the spot or contract market ahead of the traditional summer holiday season in August, when many converters may close operations for weeks at a time.

($1 = €0.71)

For more on PE and PP, visit ICIS chemical intelligence

By: Stephanie Wilson
+44 20 8652 3214

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