Europe spot LDPE prices are still strong on tight supply

24 July 2013 17:43  [Source: ICIS news]

LONDON (ICIS)--Much polyethylene (PE) business has come to a standstill in Europe this week as the market awaits the settlement of the August ethylene contract, but some low density PE (LDPE) grades are moving at higher prices, albeit on a truck-by-truck basis, sources said on Wednesday.

Buyers were discussing higher prices than they had expected when the July ethylene contract settled at a rollover at the end of June.

“We are pushing for the increase because we can,” one LDPE buyer said his supplier had told him. The supplier went on to tell its customer that it would be under more pressure in August to pay more.

Some buyers were not bowing to pressure, but acknowledged that LDPE sellers were bullish.

“If when I’m back [from holiday] I have to pay more, I will, but I won’t invest money now as the situation is unclear,” a distributor was told by one of its buyers.

Large buyers were also under pressure.

“In LDPE it will be really difficult to get a rollover,” said one who had initially expected to be able to buy at the same price as June and now expected an increase in its monthly contract of €20-30/tonne for July.

Fractional melt index 0.3 LDPE supply is particularly tight, and spot prices are recorded as high as €1,350/tonne FD (free delivered) NWE (northwest Europe) again this week. Prices had started to drift down below €1,300/tonne in mid-July.

Several major LDPE producers closed their order books last week as availability was tight. Tightness is thought to be caused by production cutbacks and a possible outage at a major production unit, but there was no confirmation of this.

Linear low density PE (LLDPE) C4 (butene based) was also tight, and some higher prices were noted for July.

“We have managed to lift prices by €20/tonne this week,” said one supplier.

A spot LLDPE seller said most of its business was back up to €1,300/tonne FD NWE but there is plenty of evidence that business is being done at €1,270/tonne FD NWE.

The August ethylene contract is widely expected to increase, and producers are expected to attempt to transfer this increase onto August PE pricing.

Some buyers argued that naphtha prices are slipping, and the exchange rate now favours European producers, which should lead to a less severe approach from producers next month. They also pointed out that August volumes would be down, as the holiday season will be in full swing.

LDPE and LLDPE pricing will only be fully settled for July next week, when retroactive accounts settle their business, and when producers will be setting out their targets for August once the ethylene contract is known.

LDPE and LLDPE are used widely in packaging and in the agricultural sector.

($1 = €0.76)

By: Linda Naylor
+44 20 8652 3214

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