FocusEurope PE, PP buyers exercise extreme caution

11 March 2013 12:40  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS)--Polyethylene (PE) and polypropylene (PP) buyers are exercising a good deal of caution when committing to volumes this month, sources said on Monday.

“Buyers are buying smaller quantities more frequently,” said a trader. “Rather than taking 200 tonne lots, they are buying 50-100/tonnes at a time and waiting.”

“Underlying demand remains weak,” said a producer, “but sales are coming in day by day and March is no worse than we expected so far.”

“March demand is better than February,” said another PE producer, “but the benchmark is not a challenging one.”

Demand has surprised many sellers by being so weak for many months, but production has been cut back and there is no big supply overhang in Europe at present.

Imports are also not widely available in most PE and PP grades, particularly with the weaker euro.

Producers are still looking for increases in both the PE and PP sectors for March following the €50-55/tonne ($65-71/tonne) hikes in the ethylene and propylene monomer contracts for March.

Success in the PP sector is looking more likely than in PE at present.

“I am expecting a €20-30/tonne increase in PP for March,” said one buyer, “but I’m holding out on PE for the time being.”

The PE market lends itself better to procrastination over pricing discussions as many large low density polyethylene (LDP|E) and linear low density polyethylene (LLDPE) accounts settle on a retroactive basis, at the end of the month for the current month, whereas PP prices tend to settle by the middle of the month.

Upstream tightness in the propylene sector has meant PP availability is not at all long, whereas PE availability is more available.

Sellers are hopeful that April demand will bounce back after several months of disappointing volumes, and spot prices for both PE and PP have risen in March.

“I hope April will be better, as May is a short month in many European countries,” said the trader.

In spite of the caution exercised by most of the market, there is no expectation of a price drop in coming weeks.

Naphtha has settled down on a lower base,” said a PP buyer, “but it is still high and the weaker euro doesn’t help European naphtha-based producers.”

Naphtha was trading at $931-933/tonne CIF (cost insurance freight) NWE (northwest Europe) on Monday morning.

LDPE is around €1,320-1,350/tonne FD (free delivered) NWE, and homopolymer PP injection is at €1,230-1,260/tonne FD NWE. Both products have seen mild price increases since the end of February.

Monthly discussions are ongoing.

($1 = €0.77)

By: Linda Naylor
+44 20 8652 3214

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