FocusEurope spot polyethylene prices take a dive

26 April 2013 10:33  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS)--Polyethylene (PE) spot prices in Europe have taken a dive this week as some sellers try to tempt buyers into sales at May prices, sources said on Friday.

It is almost impossible to differentiate between bids and offers and business done, such is the spread in the market.

“I’m doing lots of business at low prices on top of my normal contracted volumes,” said a large converter, “I think what we are seeing now is May prices being done in April.”

It is far from clear where May prices will land, however, as players wait for the ethylene contract to be done. Naphtha has moved up from a low of $778/tonne CIF (cost, insurance and freight) NWE (northwest Europe) last week to $817-819/tonne CIF NWE on Friday morning.

A decrease is still expected in the May ethylene contract, but the reduction could be tempered by the rise in the naphtha market. The April ethylene contract stands at €1,265/tonne ($1,643/tonne) FD (free delivered) NWE. At the end of March the naphtha price was at $883-887/tonne CIF NWE.

Buyers say they have already been granted the drop in the ethylene contract price for PE in May, whatever that might be, by more than one major supplier, while others wait for the contract settlement to be done before making their intentions clear.

One theory running in the market is that producers will let prices fall sharply in May in a move to bring recalcitrant buyers back to the market.

Against this background some very low spot offers are being made, well below the level of the ethylene contract price.

Low density polyethylene (LDPE) monthly business has dropped by around €60/tonne, in line with the April ethylene contract, but spot prices have lost by as much as €150/tonne at the same time.

“I can’t believe I was selling [LDPE] at €1,300/tonne [FD NWE] only a couple of weeks ago,” said a trader. “Now I’m lucky if I get €1,150/tonne.”

The sharpest falls are heard in the high density polyethylene (HDPE) sector as material from new Middle Eastern production has been offered into Europe. Blowmoulding has been particularly strongly affected.

At the end of March sales at €1,300/tonne FD NWE were possible for HDPE blowmoulding, but this week levels as low as €1,100/tonne FD NWE and even below are talked. Confirmation at these levels is not easy to come by and some prices heard are considered to be bids by bold buyers who are trying their luck.

 “You have to offer low to get any business at all, and even then buyers probably won’t act,” said another trader.

The May ethylene contract is expected to settle imminently and this will show some direction for May PE pricing. Sellers hope this will bring buyers back to the market as prices could be reaching the bottom.

Not all players agree, however.

“I see no reason for prices to go up in this market,” said a buyer, commenting also on the poor economic situation in Europe and beyond.

PE is used widely in the packaging and household goods sectors and also in the manufacture of film used in the agricultural industry.

($1 = €0.77)

By: Linda Naylor
+44 20 8652 3214

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