20 September 2012 12:24 [Source: ICIS news]
By Linda Naylor
LONDON (ICIS)--Polyethylene (PE) spot prices have started to fall in Europe on slow demand, as sellers are no longer able to attract buyers at former high price levels, market sources said on Thursday.
“I can no longer sell LDPE [low density polyethylene] at €1,430/tonne like last week,” said a trader.
Another agreed: “I’m only doing the odd truck because demand is just not there, but I’m selling well below €1,400/tonne now,” he said.
Business is reported on a free delivered (FD) northwest Europe (NWE) basis.
Crude and naphtha prices have fallen substantially in the past few days, following Saudi oil minister Ali-al Naimi’s signal that oil production could be stepped up in a move to calm rising prices that are having a detrimental effect on demand worldwide.
PE demand in Europe had already begun to falter before upstream prices started to slip. This was blamed on high polymer prices that were stifling demand. During the second half of September, weak demand has prompted sellers to offer lower levels for some PE grades.
LDPE prices had reached a pinnacle of €1,500/tonne ($1,948/tonne) at some desperate accounts in early September and linear low density polyethylene (LLDPE) C4 has slipped from a high sometimes above €1,400/tonne to €1,330-1350/tonne. HDPE spot prices are pretty stable around €1,450/tonne.
The already weak demand picture in Europe has been exacerbated by lower crude oil and naphtha prices. On Thursday, naphtha was trading as low as $900/tonne CIF (cost insurance freight) NWE, from a high of above $1,000/tonne only a week before.
This swift drop in upstream pricing has led to hesitation from most buyers as they scent lower PE prices imminently.
Meanwhile, producers forge ahead with price increases for September and, on the whole, are applying them. Most PE prices have moved up by much more than the €125/tonne increase in the September ethylene contract price, in spite of most buyers saying that they have not experienced any shortages, with the exception of the high density polyethylene (HDPE) sector where three cases of force majeure remain in place in Europe.
“It’s true that the market is being dominated by lack of supply rather than lack of demand,” acknowledged an HDPE producer.
2012 has been characterised by unprecedented volatility, and some sources say the current situation puts them in mind of April, when demand ground to a halt following a series of hefty price increases.
Producers argue that October will not witness the sharp fall seen in July, as their stocks are low and they will not be forced to sell, but the fall-off in demand after the first 10 days of September will inevitably lead to higher stocks.
Most sources saw the downward trend of naphtha as the principal driver of PE pricing, however, and this is leading to hesitation on the part of many buyers as they watch to see where prices go next.
Some buyers expect PE prices to start falling pretty sharply in the fourth quarter:
“There is a crash ahead and the suppliers still haven't even seen the iceberg,” said one buyer.
($1 = €0.77)
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