29 April 2013 12:22 [Source: ICIS news]
LONDON (ICIS)--Many polyethylene (PE) and polypropylene (PP) producers are offering lower prices for May business throughout Europe following the €80-100/tonne drop in the new monomer contracts, sources said on Monday.
“We will be targeting a decrease of €70/tonne [$91/tonne],” said a major PE producer, while another said it would concede the full €100/tonne ethylene drop to its customers in May, but only for the first half of the month.
“We will follow the monomer movement,” it said, “and we expect volumes to be not bad.”
“We are trying to hold on to some margin for both PE and PP,” said another producer, “but it will be easier for PP than for PE.”
Yet another producer said it was not prepared to give away the complete ethylene and propylene decrease for the month, but declined to say what price level it would be seeking.
There is a growing feeling among producers that polyolefins pricing could reach the bottom in May as naphtha prices continue to climb, but the feeling among buyers is mixed.
“This could be the bottom? I don’t think so,” said one buyer.
Most sellers, however, expect May demand to be better than the poor showing of recent months, when PE demand has been well below average, while the PP market has been better balanced.
Production has been running well below average for some while and sources estimate it to be 75-80% of capacity.
As it became clear that ethylene and propylene contracts were going to fall significantly for May, the end of April saw a sharp fall in spot pricing, in both PE and PP, but particularly in the high density polyethylene (HDPE) sector, where new availability from the Middle East has affected European pricing.
Bids at €1,000/tonne FD (free delivered) NWE (northwest Europe) for most PE grades were not uncommon, but sales have been thin and most sellers were not prepared to go so low, seeing €1,150/tonne FD NWE as the lowest level. At the end of March, PE spot business was still being done above €1,300/tonne FD NWE in many cases.
These prices are barely above the monomer contracts. The May ethylene contract stands at €1,165/tonne FD NWE, while propylene settled at €1,025/tonne FD NWE.
PP spot prices are heard as low as €1,050/tonne FD NWE, but most sources see them well above €1,100/tonne FD NWE.
On Monday morning naphtha prices climbed again, to $810-812/tonne CIF (cost insurance & freight) NWE. At the end of March naphtha was trading at $883-887/tonne CIF NWE, but fell to $792-794/tonne CIF NWE in the week ending 19 April.
PE and PP buyers are finding the volatility of these markets, heavily affected by upstream price movements, hard to manage.
Even if demand does pick up in May, the weak economic situation in Europe is not expected to improve. One producer saw some hope in the situation, however. “Now that European prices are so low, we expect Middle Eastern product to move more towards Asia,” it said.
The details of PE and PP pricing in May will be long to settle but a hefty price drop is clearly on its way. The amount will be evident only once May has begun.
PE and PP are used in packaging and the manufacture of household goods. PE is also used in the agricultural sector and PP in the automotive industry.
($1 = €0.77)
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