Price and market trends: Europe PE, PP demand hit by expectations of lower Nov prices

18 October 2013 09:49  [Source: ICB]

Polyethylene (PE) and polypropylene (PP) demand in Europe is being affected by expectations of lower November monomer contracts, and consequently lower polymer prices, sources said on 11 October.

“A salesman told me product would be cheaper in November than October,” said one PP buyer.

“I haven’t bought big volume for October,” said another. “I would like to arrive at the end of October with no more than one week’s stock.”

A PE buyer agreed: “This is not a good time to have inventory.”

Expectations of lower prices in November are based on weaker naphtha prices and a build-up of stock with producers because of low demand.

September demand was weak, after a brisk start when naphtha prices spiked on Middle East tensions. When it became clear that these tensions were easing, naphtha prices fell, and stabilised around the $900/tonne (€666/tonne) CIF (cost insurance freight) NWE (northwest Europe) level. PE demand subsequently slumped.

Naphtha, however, has increased sharply, rising by $13-14/tonne on 10 October, trading at $914-916/tonne CIF (cost insurance freight) NWE.

During the week ending 4 October, naphtha slipped to $865/tonne CIF NWE, from a high of $967/tonne CIF NWE in the week ending 6 September.

This volatility has been a feature of naphtha pricing, a principal driver of PE and PP prices, over the past months.

Some polyolefins sellers said demand was better than expected in October, particularly producers, and sources put this down to converters securing end-year volumes with their regular producers, to ensure achieving their extra rebate. Spot markets were particularly weak with some very low price levels. Buying has been very cautious.

Most sources saw PP homopolymer injection spot prices around €1,200-1,220/tonne FD (free delivered) NWE (northwest Europe), on a net basis, from €1,280-1,300/tonne in the middle of September.

Low density polyethylene (LDPE) prices are now sometimes trading below €1,300/tonne FD NWE, from €1,380-1,400/tonne as recently as the week ending 20 September. There was some talk of business done at €1,250/tonne FD NWE, but this is considered to be too low by most sources. Activity has been very low in the past week.

Buyers are in no hurry to buy from traders, or even to grasp the very low numbers that are offered, as they do not expect to be using the material in October.

“I’m not going to buy from a trader and give up my annual rebate,” said a PE buyer. “There are more chances of prices going down than going up next month. A price would have to be very attractive indeed to tempt me to buy.”

The buyer continued to say that even if prices did turn up in November against all current expectations, they would not move much, and it was better to have an empty warehouse than over-priced material, losing capital value.

By: Linda Naylor
+44 20 8652 3214

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