Europe PE buyers pay more for June but fundamentals still weak
ICIS News : 21-Jun-13 10:53
By Linda Naylor
LONDON (ICIS)--Polyethylene (PE) buyers in Europe have been faced with significant hikes of €50-60/tonne ($66-79/tonne) in June but many still say order books have not improved as underlying economic conditions remain poor, sources said on Friday.
“We don’t have the orders,” said one large PE buyer. “I’m not going to go away on holiday with a warehouse full of stock. It’s just too dangerous.”
PE production has been cut back for many months in Europe to accommodate low demand. In May, some producers were running as low as 70% but the average was higher than this, with sources estimating it to be at 75-80%.
Buyers came back to the market in May, convinced prices had reached the bottom of the cycle and prices rose as availability tightened.
Demand was better than expected and strong volumes have continued into June, leading to tightness in the low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) C4 (butene-based) sectors.
There are no shortages in the high density polyethylene (HDPE) blowmoulding and film sectors, while HDPE injection availability is tight.
Sources are now eyeing July. Some producers expect to be able to increase prices again, particularly in LDPE and LLDPE C4.
Much depends on the level of demand and the movement in the upstream ethylene market.
"PE prices increased by more than the monomer in June," said another buyer, "but I can't see that happening in July. Their [producers'] margins are better now."
Fundamentals suggest little movement in the new monomer contract, as naphtha prices are barely changed in euro terms from when the last ethylene contract settled.
The holiday season is now beginning in Scandinavia, and southern Europe will take its usual holidays in August, impacting PE offtake.
Buyers do not expect big price movements in July, so they do not see the necessity to have high stocks, even if prices move up again after the holidays.
European economies and forecasts remain weak and many PE sources see the upturn in activity and pricing to be a result of replenishing empty stocks to a workable level.
LDPE spot prices are now moving at €1,300-1,320/tonne FD (free delivered) NWE (northwest Europe), from a low of €1,150/tonne FD NWE at the beginning of May.
PE is used widely in packaging and the manufacture of household goods and film for the agricultural industry.
($1 = €0.76)
By Linda Naylor
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