FocusEurope polymer demand slows but all eyes on naphtha

11 July 2013 14:07  [Source: ICIS news]

LONDON (ICIS)--European polyethylene (PE) and polypropylene (PP) demand has slowed down in July, with the exception of low density polyethylene (LDPE). This follows a very strong May and healthy June volumes, but the focus of attention is now on upstream naphtha pricing, sources said on Thursday.

June PE sales were down on May, following a very weak start to the year, and distributors in particular say demand is slow in July.

“The market is very quiet,” said one distributor, “but on the other hand [upstream] prices don’t allow for any special deals.”

“July has been slow so far and I can’t believe that there will be more sales in the last 15 days of the month,” said another.

Buyers had been hopeful of lower polymer prices in August as they expected volumes to be weak, but upstream feedstock naphtha prices have soared in recent days, largely on geopolitical events. This has eaten into producers’ margins and they are unlikely to drop prices willingly in August.

On Thursday morning, naphtha was trading at $882-891/tonne (€688-695/tonne) CIF (cost, insurance & freight) NWE (northwest Europe), from a low of $821/tonne CIF NWE during the week ending 21 June.

Some producers have already begun to talk of higher monomer contracts in August, while buyers hold out hope for lower naphtha prices to come.

PP demand for producers has seen a fillip in the guise of some production issues that have led to a declaration of force majeure from two suppliers on certain PP grades. However, even with these restrictions in place, buyers said they have been able to get all the volumes they need.

“PP is a bit tight on certain grades but still no talk of July price increases at the moment,” said a large buyer. 

The LDPE sector remains strong, particularly for melt index 0.3, and Dow Europe closed its LDPE order book on Thursday. C4 (butene-based) linear low density polyethylene (LLDPE) pricing is also firm.

Problems with high density polyethylene (HDPE) injection supply from Egypt are also supporting prices, while HDPE blowmoulding and film prices are in the doldrums.

“There is a lot of [HDPE] on offer at the moment, and stock with customers is not building as they don’t believe prices can go up,” said one of the distributors.

Confidence in PE and PP markets in Europe is not running high, as holidays begin to affect demand and most players see no fundamental change in market conditions, but August is becoming more difficult to read as July progresses.

($1 = €0.78)

By: Linda Naylor
+44 20 8652 3214

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