Europe PE Feb buyers target drops bigger than ethylene

By Linda Naylor

LONDON (ICIS)–Some polyethylene (PE) buyers in Europe are looking to achieve price decreases greater than the €40/tonne drop in the February ethylene contract price, but much depends on the PE grade in question, sources said on Friday.

“My feeling is that no supplier is confident with [keeping] just the C2 [ethylene] drop,” said one buyer.

Low density polyethylene (LDPE) spot offers in particular have been heard offered below contracted levels, and while many players said the market price for most LDPE spot business is around €1,280/tonne FD (free delivered) NWE (northwest Europe), numbers are talked as low as €1,230/tonne. Some higher-end business for truck loads was also mentioned at €1,300/tonne.

So far several producers have confirmed the likelihood of a €40/tonne drop for February monthly volumes, in line with the ethylene decrease, but they are loath to admit the possibility that price might erode further.

Many LDPE and linear low-density polyethylene (LLDPE) prices settle on a retroactive basis, at the end of the month for the current month.

If some buyers expect a stronger price reduction than €40/tonne, targets are not much more than this level. Some are looking to obtain a €50/tonne decrease in February, with a small number targeting steeper falls.

High density polyethylene (HDPE) net prices, when discounts have been applied, are often so low that some large buyers said they cannot envisage a drop bigger than €40/tonne for February.

Spot HDPE prices have been trading around €1,200/tonne FD NWE this week, from as high as €1,270/tonne at some accounts in mid-January. LDPE has fallen more sharply, from a high of €1,370/tonne in mid-January.

“When LDPE prices go up, they go up more quickly than other grades, and when they go down it’s the same,” said a producer.

Monthly contracted prices have not seen such dramatic price moves, and most business is done on a contractual basis.

Net prices for monthly contracts are difficult to pin down, as discounts are applied on an individual basis, depending largely on volume.

The reason for February’s price decline in contracted and spot prices is down to poor demand, and fluctuations in upstream pricing that make it hard for buyers to believe there will be an upward move in next month’s ethylene contract.

Friday’s naphtha assessment at noon was $901-903/tonne CIF (cost insurance freight) NWE, and spot ethylene remains well below the current contract level of €1,200/tonne FD NWE.

Under these circumstances PE buying  is expected to remain cautious for some time.

PE is used in packaging and household goods sectors and also in the agricultural industry.