FocusEurope PE prices slump on low demand, weaker feedstock prices

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

By Linda Naylor

LONDON (ICIS)--European monthly polyethylene (PE) prices are being offered at a considerably lower level than in April, while spot values are falling sharply as both traders and producers attempt to incite buying interest among recalcitrant buyers, sources said on Friday.

The market is beset by concerns over demand, credit, keenly-priced imports and weakening upstream prices.

Several large creditworthy buyers have been offered spot lots that they say they cannot take, as it would mean displacing material from other sources.

“I just don’t need 500 tonnes extra at the moment. I am working my stock down to a minimum and expect lower prices again in June,” said one.

Another buyer said: “The price would have to be very low indeed for me to take extra material at the moment.”

A trader confirmed this stance. “They will only buy if they are offered crazy prices.”

Linear low density polyethylene (LLDPE) commodity grades are among those most under downward pressure and ever-decreasing price levels are talked in some markets.

Spot linear low density polyethylene (LLDPE) prices are now trading as low as €1,200/tonne ($1,519/tonne) FD (free delivered) NWE (northwest Europe) for imported volumes, with Europeans attempting to sell higher but with fading hopes.

“We can’t sell at €1,350/tonne [FD NWE] with importers selling at €1,200/tonne,” said one producer.

Monthly prices are decreasing beyond the €20/tonne drop in the May ethylene contract price, but very little monthly business has been concluded so far for May.

Credit concerns in southern Europe are high, and some sellers hesitate to push volumes into a market where credit lines are so squeezed for fear of problems with payment.

“We need to keep a close eye on production,” said a producer, but some players feel that any reduction in output should have already been started, and that cutbacks now will not support the market in June.

Lower crude oil and naphtha prices are expected to affect the June ethylene monomer contract price, and a hefty downward correction is expected. This will inevitably lead to lower PE prices.

Brent crude oil was trading at $107.61/bbl on Friday morning, and naphtha was down to $860-869/tonne CIF (cost, insurance and freight) NWE.

Not all PE buyers are happy with the current downward trend, as they will have difficulty recovering the heavy increases of the first quarter 2012 in a falling market.

“It takes us over two months to recover price increases and this drop won’t help,” said a large buyer.

PE prices rose by over 30% in the first four months of 2012, from a very low base at the end of 2011.

Demand is weak and some PE prices are difficult to peg as buying is so thin. Most players expect an upturn in volumes once the June monomer contract has settled, so visibility will be clearer for at least early June.

PE is used in the manufacture of packaging and household goods, and also in the agricultural sector.

($1 = €0.79)

By: Linda Naylor
+44 20 8652 3214

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