FocusEurope PE, PP players await Dec monomer for price direction

22 November 2013 12:15  [Source: ICIS news]

By Linda Naylor

Direction unclearLONDON (ICIS)--Polyethylene (PE) and polypropylene (PP) producers and buyers are waiting for the settlement of December ethylene and propylene contracts for an idea of the price direction next month, several said on Friday.

“Everybody is waiting for ethylene to settle,” said a PE buyer.  “A couple of producers have said they expect a small increase.”

“At the moment we expect between a rollover and €10-20/tonne ($14-27/tonne) increase [for propylene]” said a PP producer, “but expectations change every day.”

By Friday, the high cost of naphtha was exerting more upward pressure on December monomer contracts. Naphtha closed on Wednesday at $945-947/tonne (€699-700/tonne) CIF (cost insurance freight) NWE (northwest Europe), from $930-931/tonne at the close on the previous day. By midday on Friday, the naphtha price was assessed at $953-956/tonne.

“Margins have been compressed in November,” said another PP producer. “The issue is how much monomer will increase by in December.”

There are signs of pre-buying in some PE and PP sectors, but not all, and much buying at present is down to converters ensuring they reach end-year volume rebates.

Some sellers are concerned that too much of an increase upstream could impact negatively on December demand.  

Low density polyethylene (LDPE) is on the tight side and spot prices have risen steadily but fairly modestly  in November, to €1,280-1,310/tonne FD (free delivered) NWE (northwest Europe), from a low of around €1,250/tonne at the end of October.

Linear low density polyethylene (LLDPE) C4 (butene-based) prices have also risen similarly, but spot sales are now slow. There has been no sign of low spot offers from producers this year, compared with 2012, as production and stocks have been carefully controlled.

Sellers with particularly low stocks have said that new sales, on top of those already settled for November, will be made at higher prices. This is the case for LDPE and some PP grades in particular.

Buyers are not convinced that prices will increase in December, but they are waiting for a price push in January, as prices have risen for the past five years in the first month of the year. It has also been made clear that output will continue to be reduced to avoid oversupply.

US-based Dow Chemical will temporarily close its cracker in Tarragona, Spain, on 1 December and other producers have said they will keep production under careful control.

“Stocks are very low but fundamental demand is still not healthy,” admitted another producer.

“I have been told that my December PE price will increase by whatever ethylene goes up by, but that in January prices will really increase,” said a PE buyer, “but I’m not so sure.”

High density polyethylene (HDPE) buyers remain the least concerned with talk of price hikes. Buyers in this sector are increasingly taking advantage of imports, and they said there was no shortage of these.

December ethylene and propylene contracts are expected to settle next week.

($1 = €0.74)

By: Linda Naylor
+44 20 8652 3214

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