Europe HDPE market reviews impact of Dow's Tessenderlo closure

29 November 2012 12:41  [Source: ICIS news]

Dow Headquarters, Midland, MichiganLONDON (ICIS)--European buyers and sellers on Thursday gave their reactions to news that Dow will no longer supply high density polyethylene (HDPE) from its Tessenderlo plant in Belgium from January, after the US-based producer sent out letters to its customers informing them of the shutdown.

The closure of the 190,000 tonne/year HDPE unit was announced in October, but no precise date was given. The plant produces mainly HDPE film and blowmoulding grades.

“We are reviewing the impact of Dow’s Tessenderlo closure at the moment,” said an HDPE producer. “We are not quite sure if customers will be able to get material in January.”

While there has been consternation from some buyers who have been looking to cover a possible temporary short fall, others expect no impact as production from elsewhere increases.

“There is already too much product in the market,” said a large buyer. “Chevron Phillips’ new plant in Saudi is bringing over enough volume for everybody and more. Global demand is awful, proved by the fact that we are being offered more material from the Middle East than before as they can’t sell it in Asia.”

Saudi Polymers started full commercial operations at its Al-Jubail, Saudi Arabia, production site at the end of October. The plant has an HDPE capacity of 1.1m tonnes/year and is said to be the biggest HDPE production unit in the world.

Saudi’s Petrochem holds a 65% stake in Saudi Polymers, while the remaining 35% is owned by Arabian Chevron Phillips Petrochemical – a wholly-owned subsidiary of US-based Chevron Phillips Chemical.

The European HDPE market has been tight during recent months as three cases of force majeure were in place. Production is beginning to get back to normal, however, and the market is seen as balanced.

HDPE net prices are trading around €1,300/tonne ($1,688/tonne) FD (free delivered) NWE (northwest Europe), and some producers are targeting higher prices in December on weak margins and high feedstock costs, rather than on any fundamental strength in the market.

In fact, one producer warned of a very poor 2013. “We expect 2013 to be very hard,” it said.

The buyer said: “With global demand the way it is, we can’t have poor demand and a massive increase in capacity. More closures will have to happen, and the obvious place is Europe.”

European PE costs are based largely on high-cost naphtha, and competition from ethane-based PE from the Middle East and new shale gas production from the US is making Europe increasingly less competitive.

HDPE blowmoulding is used in the manufacture of plastic bottles.

($1= €0.77)

By: Linda Naylor
+44 20 8652 3214

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