Europe PE prices slip on lower costs, weak demand

08 April 2013 12:40  [Source: ICIS news]

LONDON (ICIS)--Polyethylene (PE) monthly prices in Europe are slipping on the back of the April ethylene contract settling down by €60/tonne ($78/tonne) and falling naphtha prices, while demand remains poor, sources said on Monday.

“There will be a price reduction in April,” said one PE producer; “but it’s hard to say how much at this point.”

“We will be trying to keep something of the C2 [ethylene] drop for C4 linear [low density polyethylene],” said another; “but demand is not brilliant.”   

PE prices are far from being settled in most cases but a downward trend has already been established as it becomes clear that buyers are not willing to commit at the same level as March, in spite of producers not being able to recover the full €50/tonne monomer increase they took at the time.

Producers initially spoke of a €20-30/tonne price reduction for the month, with the exception of Dow which announced a €30/tonne increase on its website on Monday, but it was already clear by the end of week 14 that price erosion for April looked likely to be more than this modest decrease.

Monthly PE will not be fully settled until the end of the month so there is much time for negotiations but unless there is a sudden upturn in naphtha pricing, PE prices look set to fall.

Spot prices have also eased in recent days but actual levels are difficult to peg in many cases as buying is cautious. Prices for most PE commodity grades have dipped below €1,300/tonne FD (free delivered) NWE (northwest Europe), with bids often much lower, from above this level for much of 2013.

Spot sellers are loath to concede lower levels, however, as their costs have been high. “We aren’t dropping our prices below €1,280/tonne FD NWE,” said a trader. “We can’t import at better conditions so why would we?”

Traders in general were unable to source product at workable levels. Inventories in general are widely thought to be low but demand is also down.

“We don’t have much stock of anything,” said one producer; “but our demand is pretty terrible.”

Several sellers hope for an upturn this week, when many players will be returning to the market after holidays in Europe but for the time being most describe demand as disappointing.

Many sources watch the price direction of naphtha, seen as a principal driver of ethylene and PE, with a keen eye.

On Monday, naphtha was trading at $849-850/tonne CIF (cost insurance freight) NWE, yet was trading above $1,000/tonne CIF NWE in mid-February. Net low density polyethylene (LDPE) prices at the time were at €1,300-1,340/tonne FD NWE. The ethylene contract stood at €1,275/tonne FD NWE at the same time, subject to discounts. The April ethylene contract is at €1,265/tonne FD NWE.

PE pricing discussions are not expected to finalise in many regions before the end of the month. PE is used widely in the manufacture of packaging and household goods, and also in the agricultural sector.

($1 = €0.77)

By: Linda Naylor
+44 20 8652 3214

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