Europe PE prices ease as May starts slowly

02 May 2012 12:35  [Source: ICIS news]

LONDON (ICIS)--Polyethylene (PE) prices are easing by up to €20/tonne ($26/tonne) as initial offers are made for May business, sources said on Wednesday.

“I have been offered between a rollover and minus €20/tonne,” said one buyer.

Expectations for lower May PE prices have been high, following several months of significant price hikes, and PE prices have risen by more than 30% in 2012.  

Buyers destocked on a large scale in April and the settlement of the May ethylene contract price at €1,325/tonne FD (free delivered) NWE (northwest Europe), down by €20/tonne from its April level, has led to some producers already offering a €20/tonne reduction in their May offers.

The drop in the May ethylene contract price was less than many had expected, given that the spot ethylene price is now down to $1,400-1,450/tonne CIF (cost insurance & freight) NWE. The fact that the contract price was settled only on Friday 27 April, ahead of holidays in most of Europe on 1 May, means that not much PE pricing has been settled so far for May.

Producers say that their order books are normal for the time of the month, but some buyers still plan to destock in May, to put more pressure on producers. Buyers are not expected to push too hard, however, as they need to recover the increases they took in previous months from their downstream market, and a sharp downturn in May would hinder this process.

“We believe that there will be a controlled downward price direction in May,” said another buyer.

The weak ethylene spot price led some buyers to expect a reduction of more than €20/tonne in May PE pricing, but so far there are no such indications so early in the negotiation process.

PE spot prices have been a little lower for May, but the limited drop in the ethylene contract price has also had an effect on any potential price slide here too.

Low density polyethylene (LDPE) spot levels are trading around €1,350–1,410/tonne FD NWE. At the end of December 2011, they fell to levels as low as €1,030/tonne FD NWE.

The outcome of May PE discussions depends very much on demand and supply. There are no longer any shortages in the PE market, and some oversupply in certain downstream sectors, such as the stretch film market, could affect volumes again in May.

LDPE pricing is settled at the end of the month, on a retroactive basis, at many accounts, so the negotiation process is expected to be protracted.

PE is used widely in packaging and agricultural sectors.

($1 = €0.76)

By: Linda Naylor
+44 20 8652 3214

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