11 October 2013 10:02 [Source: ICB]
The October ethylene contract fell by €35/tonne ($47/tonne), settling at €1,225/tonne, while the propylene contract dropped by €40/tonne, to €1,110/tonne, both on a FD (free delivered) NWE (northwest Europe) basis.
“We will go down by more or less the monomer,” said one producer, “but no more.”
“I hope we don’t need to go down as much as monomer,” said a second producer.
Several buyers were looking at larger price reductions than the €35-40/tonne of the upstream monomer contracts, however.
“If naphtha keeps hovering around the $900/tonne mark, it will be difficult for [producers] to limit the price drop to the monomer,” said one large buyer and this sentiment was echoed by others.
However, a producer said: “Our demand isn’t looking too bad, the order income is decent and our idea is to drop prices less than the monomer.”
It was the surge in naphtha prices early in September that led to strong sentiment in the monomer markets, and hikes of €50-60/tonne in September monomer contracts.
These were transferred onto the polyolefins markets, but by the end of the month as Middle Eastern tensions eased and the pressure on naphtha prices was lifted, PE and PP demand slumped and September was a disappointing month for sellers.
Industry stock levels have risen from low August levels with producers, while buyers have been destocking, as there are no longer any expectations of higher prices in the weeks to come.
SPOT PRICES EASE
Spot prices for most PE and PP grades have been heard lower than at the end of September. A wide price range is being discussed, typical of a decreasing market.
“Demand is not bad,” said a trader. “I even sold quite a lot in the past few days – it’s the price that’s the problem.”
“In the past few days, buyers have been cancelling,” he added.
In the first half of September some low density polyethylene (LDPE) prices had risen above €1,400/tonne ($1,892/tonne) FD (free delivered) NWE (northwest Europe), as naphtha prices soared on Middle East tensions and polymer buyers feared another upward move. By 3 October, prices were coming down fast.
“I can still sell at €1,300 [/tonne FD NWE],” said the trader, “but there are bids below.”
Likewise, PP prices were down. In early September homopolymer injection prices were trading at €1,300/tonne FD NWE, but now numbers were heard in the low €1,200s/tonne FD NWE.
“Prices are falling on a daily basis,” said another seller. Business is very patchy, and buyers are only buying what they need.
“It’s difficult to get a clear picture because nobody’s buying,” said another trader.
“Buyers think November will be lower. Naphtha is down and the dollar is down against the euro. There is only one direction for prices to go,” said a distributor. “Buyers are not buying and sellers are getting nervous.”
“They [buyers] can’t wait ad infinitum,” said another seller. “At a certain point they have to buy, but they are buying only what they need and no more.”
TRADERS UNDER PRESSURE
Traders are under more pressure than producers, as many buyers are now concentrating on reaching their end-year volume rebates with producers. Many buyers have an agreement to reach a certain volume by the end of the year to be able to achieve a discount on the whole volume at the end of the year.
The current downward trend is the first since May, but many buyers expect it to continue into the fourth quarter.
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