Turkish buyers offered attractive PE/PP deals from Europe

15 June 2012 10:38  [Source: ICIS news]

LONDON (ICIS)--Turkish buyers are being offered attractively-priced polyethylene (PE) and polypropylene (PP) from Europe, often lower than Middle Eastern material, an unusual situation that players think will lead to a further drop in prices in the short term, several sources said on Friday.

Poor European demand, increasing stock levels and a favourable exchange rate have given sellers new opportunities to export.

“We are able to export at the moment in a way that has not been possible for a long time,” said one major PE producer.

Inventories of most PE grades are rising in Europe as cracker margins remain good and talk of cutbacks to curb a build-up of stocks are not yet thought to have been put into action.

“We have been talking about cutting back,” said another major producer, “but for the moment nothing has been decided. We will review things next week.”

From southern Europe, low density polyethylene (LDPE) is heard offered at levels barely above €1,000/tonne ($1,266/tonne) CFR (cost and freight) Turkey and North Africa.

“I can get low density for €1,000-1,020/tonne CFR Turkey if I pay cash,” said a trader. This was seen as low even by current standards, as LDPE was still considered to be workable at $1,300/tonne CFR."

Polypropylene (PP) has also been offered lower from Europe this week.

“Last week I could sell PP at $1,350/tonne CFR. This week buyers are telling me they are being offered $1,250/tonne CFR from Europe,” said another. However, such a level could not be confirmed by any western European so far.

Material from Europe has an advantage over that from the Middle East as no duty is applied. Middle Eastern PE and PP is subject to a 3% import duty, so it needs to be priced lower than European product to be competitive.

Local producer, Petkim, also dropped its prices again earlier this week in a move to inject some buying interest into the market.

High stocks and lacklustre demand in Europe mean that some European producers aim to increase export volumes throughout July and August.

“I intend to increase my export volumes over the next few weeks,” said another producer.

European PE and PP prices are widely expected to fall again in July as lower naphtha prices will affect monomer and polymer pricing next month. Polymer production remains high at present as cracker margins are good, and cutbacks can only be expected once margins worsen.

In April, the average price for naphtha was above $1,000/tonne CIF (cost, insurance and freight) NWE (northwest Europe), but on Friday morning it was trading at $735-743/tonne CIF NWE. Brent crude oil was at $97.91/bbl.

In November and December 2011, when PE and PP net prices reached lows of just above €1,000/tonne FD (free delivered) NWE, naphtha was in the mid-$800s/tonne CIF NWE. Spot PE and PP prices in Europe are hard to determine as such a wide range is being discussed, but similar levels as seen in 2011 have been heard.

The dollar/euro exchange rate on Friday morning was €1 = $1.26, while on 30 November 2011, it was at €1 = $1.34.

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

($1 = €0.79)

By: Linda Naylor
+44 20 8652 3214

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