Price and market trends: Europe PE producers target higher prices

07 June 2013 10:04  [Source: ICB]

Producers emboldened by tight supply in polyethylene aim for price rises in June

Europe's polyethylene (PE) producers are targeting higher prices in June, with Dow Chemical proposing a €100/tonne ($130/tonne) hike and others aiming to lift prices by a more modest €50-80/tonne, sources said on 3 June.

Increases are based on a tight supply-demand situation, particularly in the low density polyethylene (LDPE) and linear low density polyethylene (LLPDE) sectors. Tightness has been brought about by stringent production cutbacks and an upturn in demand in May.

Most monthly PE prices fell by €70-90/tonne by the end of May, as some sellers who had initially offered a €100/tonne drop in line with the fall in the May ethylene contract, withdrew it.

LIMIT TO FALL
"I wasn't able to get any more than €80/tonne [down]," said one large buyer, "and one supplier refused to settle at more than minus €70/tonne for low density."

LDPE spot prices surged during May, reaching highs of €1,300/tonne FD (free delivered) NWE (northwest Europe) and above, from €1,150/tonne FD NWE at the beginning of the month.

An LDPE producer said: "We have 70% of our orders in for June now. The order load is really strong."

LLDPE prices were also strong, on reduced availability, while the high density polyethylene (HDPE) picture was more mixed.

HDPE injection is the tightest HDPE grade and prices above €1,300/tonne FD NWE are being traded, from a low of €1,170/tonne FD NWE in May.

HDPE blow moulding spot prices are not rising to the same extent. Some sources think this is the result of the imports that were widely on offer in April and expectations of increased offers from new capacity in the Middle East.

HDPE blow moulding spot prices were at €1,140/tonne FD NWE in early May and although they were trading above €1,200/tonne FD NWE on 3 June, sellers were finding it hard to lift them in line with LDPE and LLDPE.

Many sources expect PE monthly pricing to rise in June, based on the tight supply-demand balance, but buyers are sceptical over how long any upturn could last as increases would be based on reduced output rather than strong demand.

TIGHT SUPPLY
Some production in Europe has been cut by as much as 30% in recent weeks, to accommodate low demand.

On 3 June, feedstock naphtha prices slipped to $825-829/tonne CIF (cost insurance & freight), from a high of $845-847/tonne CIF NWE during the week ended 17 May.

"[Lower oil prices will] make it very hard for suppliers to get increases in June if everyone expects falls in July," said another buyer.

June pricing discussions have not yet begun in many cases, particularly in the case of retroactive pricing settlements, which have only just ended for May.


By: Linda Naylor
+44 20 8652 3214



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