Price and market trends: Higher PE prices in Europe lead to arb possibilities

23 August 2013 09:36  [Source: ICB]

Increasing polyethylene (PE) prices in Europe are leading to arbitrage possibilities from Asia, sources said on 16 August.

European PE prices have picked up in August and low inventories with buyers and sellers, higher naphtha prices, and improvedin demand mean that most players expect the upward momentum to continue into September.

"They [producers] have the wind behind them. We have paid €40-50/tonne [up] in August and expect around €30/tonne in September," said one large buyer.

Linear low density polyethylene (LLDPE) C4 (butene based) prices are now trading at a minimum of €1,300/tonne FD ($1,733/tonne) (free delivered) NWE (northwest Europe), while in prices in Asia are trading at $1,460/tonne CFR China, according to ICIS.


With a freight of around $80/tonne, and an import duty rate of 3-6.5%, depending on the origin of product offered, there are now real possibilities of importing material into Europe, particularly if prices rise in September.


Middle Eastern suppliers are also said to be eyeing Europe as a more attractive possibility than Asia as a sales destination at present. Regular supplied of LLDPE imports to Europe from the Middle East have been down on 2012 levels this year, according to import statistics.

The risk of prices easing once an increased volume of imports begins to arrive in Europe is always present, however, but traders see some real possibilities that have not been there for some time.

"The arbitrage is open now but how long will it last?" asked one.

European PE producers are fairly confident of a smooth run in the next few weeks up to November as planned maintenance outages were expected to support pricing.

Buyers said they had been informed of a month-long outage at ExxonMobil's French production site, and INEOS' Cologne number 5 cracker would be down for six weeks in Germany, and its KG cracker in Grangemouth, UK, would also be down for maintenance, according to sources.


SABIC's number 4 cracker at Geleen in the Netherlands was also due to be down for a planned maintenance outage, unconfirmed by the producer, but widely expected by the market.

Versalis will close its Priolo LLDPE site in Italy in the coming weeks and sources expect production at the company's Sicilian sites to be affected by renovation and maintenance work.

Inventories with producers are also low, and the recent uptrend in naphtha prices is also exerting pressure on producers.

Some buyers thought the upward trend in pricing would falter before November, particularly in the high density polyethylene (HDPE) sector.

By: Linda Naylor
+44 20 8652 3214

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