FocusEurope PE spot prices surge on tight supply

23 May 2013 12:44  [Source: ICIS news]

By Linda Naylor

Europe PE, PPLONDON (ICIS)--European polyethylene (PE) spot prices are increasing sharply, with some grades rising particularly quickly as availability tightens following production cutbacks, sources said on Thursday.

Low density polyethylene (LDPE) and high density polyethylene (HDPE) injection prices have jumped significantly in the past couple of weeks.

On Thursday LDPE spot prices were as high as €1,320/tonne ($1,692/tonne) FD (free delivered) NWE (northwest Europe), from a level of €1,150/tonne only ten days before.

HDPE injection was as high as €1,300/tonne FD NWE, from a low of €1,170/tonne FD NWE mid-May.

There was suspicion and scepticism over proposals of higher prices for June monthly business.

“I hope [producers] aren’t assuming restocking is anything to do with demand,” said one buyer.

Higher spot prices – some now higher than monthly contracted sales – make a June increase almost inevitable, however.

LDPE monthly prices are not fully settled, but net prices at large accounts are expected to be lower than the current spot levels – a situation that usually does not last long.

PE demand has been poor in Europe in 2013, but several sellers said May has been their best month by far this year, as buyers have come to the market to restock, suspecting that May prices are the lowest of the current cycle.

This sentiment stems from the change in naphtha prices that led to a €100/tonne decrease in the May ethylene contract price. Since that settlement naphtha prices have increased, but remain very volatile.

On Thursday morning naphtha was back down to $826-829/tonne (€644-647/tonne) CIF (cost insurance and freight) NWE (northwest Europe).

In mid-February naphtha prices in Europe touched a high above $1,000/tonne CIF NWE, then fell steadily to below $800/tonne in mid-April, to rally in May.

Tightness in the PE market has not been brought about by strong demand, but instead by stringent production cutbacks that have left output reduced by as much as 30%, according to market sources.

“If production is cut back by so much, you can see why prices are going up,” said a producer.

Saudi producer SABIC’s 400,000 tonne/year LDPE plant at Wilton has also been having a tightening effect on the market as, according to market sources, it has been running intermittently for several weeks. There was evidence in the UK that LDPE prices were moving to higher rates because of this.

Holidays in Europe were also affecting truck deliveries in May, adding to the tightness in some areas.

June sellers are already preparing their buyers for increases, but most converters expect any upturn to fall flat in July and August as converters take holidays.

PE is used widely in packaging and agricultural sectors.

($1 = €0.78)

By: Linda Naylor
+44 20 8652 3214

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