Polyethylene Europe

Low density polyethylene (LDPE) demand in Europe has been flat in the past three months, in line with the wider polyethylene (PE) market. Production has been cut back to accommodate weaker demand and some PE producer sources say that reduced output will be a feature of the European PE market for the foreseeable future as naphtha-based production costs cannot compete with gas-based costs in the Middle East and the US. In January, producers’ targets fell short and while prices increased to a limited extent, they were not able to sustain the momentum they had built in December, as demand along the chain was flat. High naphtha and crude oil prices are expected to maintain pressure on producers’ margins, and any increase in upstream ethylene costs are expected to be transferred to PE. But sources agree that any price increases in the LDPE sector are based on upstream costs rather than on strong market fundamentals.

Linear low density polyethylene (LLDPE) prices have been mixed in the past three months. January saw a limited hike and February sellers seek increases that are unlikely to be implemented in any significant form. INEOS’s conversion of its Cologne, Germany C4 (butene-based) LLDPE plant to metallocene LLDPE (MLLDPE) at the end of 2012 is expected to support tightness in that sector. However, MLLDPE sellers are now keen to maintain market share in the face of new production, and price increases in this sector look unlikely. C8 (octene-based) LLDPE prices are also subject to impact from the length in the MLLDPE market. As in the wider PE market, increases in the LLDPE market are based on high costs and production cutbacks, rather than any fundamental market strength.

High density polyethylene (HDPE) demand in Europe has been flat in the past three months, and while some minor increases were implemented in January, February pricing looks flat, with some small upward movements at very low-priced accounts. Supply general outweighs demand, but upstream costs remain high, so a sharp downward price move is not expected. A sharp increase is also ruled out by most players, as demand cannot support a big hike, and market fundamentals remain weak. Planned and unplanned closures in Europe and the Middle East have restricted availability and led to price increases in close export markets, like Turkey and North Africa, but these temporary shutdowns are seen as a support to European pricing.

Updated to mid-February 2013