FocusEurope PE, PP markets at a standstill as crude prices slump

24 May 2012 11:24  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS)--European polyethylene (PE) and polypropylene (PP) markets remain paralysed as players wait to see where June's ethylene and propylene monomer contracts land amid falling crude and naphtha prices, market sources said on Thursday.

Brent crude oil was trading below $106/bbl on Thursday, from above $125/bbl at the end of March. Naphtha prices have also slipped similarly and cracker margins are at their best for some considerable time as feedstock costs drop.

Such a price fall is leading to expectations of a big reduction in June ethylene and propylene monomer contracts, following their mild decrease in May, and buyers buy only what they need.

Spot offers of both PP and PE are being reported throughout Europe, from traders and producers alike, but buyers are very cautious.

“I am waiting for June,” said a PP buyer who said he had been offered homopolymer injection at €1,200/tonne FD (free delivered) NWE (northwest Europe) from a European producer. “I am clearing all my stock.”

Spot PP homopolymer injection prices had been trading at €1,350/tonne FD NWE in early April.

PE spot prices are also trading much lower and buyers show as little enthusiasm to take volumes as they do in PP.

“Prices have to be very low for me to be tempted,” said a PE buyer.

A trader, despondent over the lack of demand in the current market, said: “Don’t call us, we’ll call you, that’s what they [buyers] tell me.”

Another added: “There is no discount big enough for me to be able to sell at the moment.”

Buyers are running down stocks as much as possible and order minimal volumes at very late notice.

All players in these markets are hoping for a significant drop in monomer contracts for June. There is a widespread feeling that if the ethylene contract only slips down by two digits, polymer demand will remain flat, as buyers will expect another drop in July, based on the much weaker crude and naphtha figures currently trading.

Cracker margins have improved significantly since the recent drop in crude oil prices.

“If they don’t make a serious adjustment now, they will really test people’s patience,” said a PE and PP buyer, commenting on June monomer contracts.

A producer agreed: “We are hopeful of a three-digit increase in June. That should bring people back to the market after destocking.”

Some monomer buyers are pushing for very large increases, but no contract settlements are expected before next week.

PE and PP are used widely in the manufacture of food packaging and household goods. PE is also used in the agricultural sector and PP in the automotive industry.

($1 = €0.80)

By: Linda Naylor
+44 20 8652 3214

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