Europe PE pipe falls €40/tonne on feedstock, first drop in '12

10 May 2012 18:53  [Source: ICIS news]

LONDON (ICIS)--European polyethylene (PE) pipe resin prices have fallen for the first time this year because of downward pressure from falling feedstock prices, despite peak season in pipe markets, producers and converters said on Thursday.

Industry sources, including producers, acknowledge that prices could fall further this month.

Prices are assessed at €1,555-1,570/tonne ($2,019-2,039/tonne) for PE 100 and PE 80 pipe grades, down by €40/tonne.

The decrease is more than initially expected, when demand was expected to cap the PE pipe price fall after the May feedstock ethylene contract settled at €1,325/tonne FD (free delivered) NWE (northwest Europe), down by €20/tonne.

However, sentiment weakened further this week on softening naphtha prices, and initial selling ideas from a roll over to a decrease of €20/tonne from April have been replaced by offers at a minimum drop of €40/tonne.

European naphtha prices have fallen by approximately 15% over the past month, according to ICIS. This is attributed to a combination of lower Brent crude oil prices and poor demand for naphtha exerting downward pressure on the crack spread. 

PE pipe buyers are on a wait-and-see mode this week as they consider the fall in naphtha prices as a signal for even lower prices in June, adding to the pressure on many producers to reduce offers.

The total decrease for this month has been cited at anywhere between €40-70/tonne. One producer said it has seen product being offered at a decrease of €70/tonne, but gave no further details. Another producer said it has sold product at minus €40/tonne.

One buyer said €40/tonne is the minimum decrease acceptable for PE pipe resin in May, as this would be consistent with the producer practice over the last four months of securing additional increases on top of the monthly ethylene price movement. A change in that policy would not be acceptable for buyers when the market has shifted in favour of the buyers and prices are falling, the source added.

Converters are seeing mixed downstream demand in the northwest European market.

There is healthy demand from the downstream utilities sector, including water-pipe applications, although this varies across countries. Demand from the construction sector is poor.

Supply is healthy as producer inventory levels are good to balanced.

The April PE 100 and 80 pipe grade prices were the highest on record since ICIS first started tracking the specialty grade in late 2009. Prices increased by 24% and 25% respectively on average in the first quarter of 2012, and witnessed an additional increase of €30-40/tonne in April.

($1 = €0.77)

By: Cuckoo James
+44 (0) 208 652 3214

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