FocusEurope PE tightness leads to higher July expectations

19 June 2014 12:19  [Source: ICIS news]

Focus article by Linda Naylor

Europe PELONDON (ICIS)--Polyethylene (PE) players in Europe are already looking to July as availability of some grades is so scarce, and with fewer imports and good demand, this could lead to higher prices, market sources said on Thursday.

“We aren’t seeing higher prices yet as we have nothing to sell,” said one distributor.

“I can’t really comment on LDPE [low density polyethylene] prices as it’s very short,” said another.

The tightness in this sector was down to production cutbacks and a surge in demand for spot product once crude oil and naphtha prices started to rise, leading to fears of a higher ethylene contract for July.

Monthly LDPE buyers that had secured volumes from their regular producer for May were not aware of shortages, but all sources have been watching the rise in upstream prices that are expected to affect PE pricing next month. PE prices have been following upstream ethylene movement fairly closely for many months.

“At the beginning of May, LDPE was about €1,300-1,310/tonne [FD NWE],” said one of the distributors, “but if I had any to sell now I would not sell it below €1,350/tonne.”

Some buyers caught short have had to approach traders for material in June.

“I needed to buy some LDPE but my supplier didn’t have any so I had to go to a trader,” said one buyer. “I generally don’t buy from them.”

Last week Dow closed order books on tubular LDPE, and this week followed with an order stop on high density PE (HDPE) injection grades, said sources. Other producers were widely said to have closed order books on several PE grades for June this week.

Output has been running at reduced rates for some time, and imports have also been reduced from GCC countries since the introduction of increased import duties on 1 January 2014.

It was not just LDPE availability that has tightened. Medium density PE (MDPE) film grades are also in very tight supply, thought to be down to production problems and improved demand, and with the possible exception of some linear low density polyethylene (LLDPE) grades, spot prices are higher in the second half of June.

LLDPE availability is not long, but there is a lot of competition between LLDPE grades from different suppliers who are loath to lose market share in their own sector.

LLDPE can often be blended and substituted, also with LDPE, so buyers usually have several options open to them. Spot prices have risen for all grades in June, but more modestly than in the LDPE sector.

The main focus of interest in the PE market at present is where the July ethylene contract will land. The June contract settled up by €10/tonne, at €1,170/tonne FD (free delivered) NWE (northwest Europe).

Most monthly PE sellers are expecting to pay €10/tonne up at retroactive accounts that only settle at the end of the month but it is clear that some sellers will be pushing for more.

PE is used widely in the packaging and agricultural industries.

By: Linda Naylor
+44 20 8652 3214

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