Europe PE spot prices up by 20% since December

13 February 2012 12:45  [Source: ICIS news]

By Linda Naylor

Europe PE spot up by 20% since DecemberLONDON (ICIS)--European polyethylene (PE) spot prices are up by 20%, and more in some cases, since their low in December as reduced output, high feedstock costs and expectations of a further increase in the March ethylene contract price affect availability and sentiment, sources said on Monday.

Low density polyethylene (LDPE) prices in particular have soared since their mid-December low of €1,030/tonne ($1,355/tonne) FD (free delivered) NWE (northwest Europe), below the headline ethylene contract price of €1,080/tonne FD NWE.

They are currently trading at a minimum of €1,260/tonne with some business done as high as €1,320/tonne.

Buyers acknowledge that they have had to pay heavy increases for February volumes, amounting to plus €130/tonne over January in some cases.

“It’s a sad reality, but we just won’t make the stuff,” said a major PE producer, commenting on the current high costs of production.

On Monday morning Brent crude oil was trading at $118.51/bbl, and naphtha was at $1,028–1,036/tonne CIF (cost, insurance & freight) NWE.

Production has been reduced significantly for many weeks in Europe, at the cracker and polymer levels, and producers have brought down inventories that led to the low-priced sell-off of some PE grades in November and December.

Even with significant increases implemented across the board in February, there is still a good deal of caution in the PE market. The sudden upturn in prices has led to new offers of imports, absent from the market in the recent past as the European price level was too low to be attractive to importers.

“We have had several offers of imports, admittedly too high to work at present, but if prices carry on increasing, they will be workable soon,” said a high density polyethylene (HDPE) buyer.

“We have been offered material from the Middle East at very interesting prices,” said a linear low density polyethylene (LLDPE) commodity buyer. Middle Eastern sellers are beginning to see Europe as a viable alternative to Asia, as prices surge.

LLDPE C4 (butene added) product is no longer available in Europe at the low levels of December, when some net levels fell below €1,000/tonne FD NWE. Spot sellers are now seeing prices closer to €1,300/tonne FD NWE for LLDPE C4 business. More sophisticated LLDPE grades have also risen similarly.

Asian LLDPE prices are reported at $1,260–1,300/tonne CFR (cost & freight).

LLDPE availability in Europe has been affected by production problems, as well as being reduced for commercial reasons, and there are now pockets of shortness in some areas.

HDPE pricing is undergoing similar increases to LDPE and LLDPE grades, although a very wide range is reported from the HDPE injection sector.

Some players are speculating on how long the upward trend will last.

“We expect an increase for ethylene in March, so we are buying our full contracted volumes in February, and also in January, even though our demand is poorer than we expected,” said a large buyer. “That way, we won’t have to buy so much in March.”

PE is used widely in the packaging industry, and LDPE and LLDPE are also used in the agricultural sector.

($1 = €0.76)

By: Linda Naylor
+44 20 8652 3214

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