Europe polyethylene, polypropylene demand suffers on high pricing

LONDON (ICIS)–European polyethylene (PE) and polypropylene (PP) demand is lower and buyers expect April pricing to be the top of the current cycle, several said on Friday.

Crude prices have eased and the gap between Asian and European pricing is approaching the same level in some grades as when prices fell in 2011.

Demand is taking a hit in April because of holidays throughout Europe but also because many buyers intend to leave the month with no stock, as they expect May pricing to fall.

Some imported volumes have been seen but nothing out of the ordinary is available for prompt delivery. Some buyers have now bought for May in a move to avoid buying from European suppliers and to force their hand.

“We are seeing no imports to talk of,” said a major PE producer. “Production is cut back and demand isn’t at all bad.”

Producers are also relying on the fact that traders will not risk bringing over material to Europe for May arrival: as Iranian volumes will be missing from the market in May they are feeling more confident.

Most sources do not expect pricing to collapse in May and June despite weak demand in April.

“We are not in the same position as in 2011,” said another producer. “Then, producers’ margins had been good, so production levels were high. Now, we have only just moved into positive territory as far as margins are concerned, so production has been low and inventories are under control.”

The same producer described April buying as speculative, leading to a reduction of 10% below expectations. Sources add that a long holiday weekend in most of Europe was expected to lead to low volumes.

In 2011, net homopolymer PP injection prices started to fall from a high of €1,410/tonne ($1,855/tonne) FD (free delivered) NWE (northwest Europe), to land at €1,045/tonne FD NWE in early December. Current pricing is at €1,330–1,350/tonne FD NWE.

PE pricing followed a similar trend.

Many players are now looking towards May and June. While some buyers target lower prices, others would be happy with a period of stability, something that is now rare in these markets.

PE and PP are used extensively in packaging, automotive and agricultural industries.

($1 = €0.76)