Europe PE players dispute April price direction

Focus article by Linda Naylor

LONDON (ICIS)–Polyethylene (PE) buyers and sellers in Europe are disputing the direction of prices for April, following the settlement of the monthly ethylene contract at a reduction of €15/tonne last week, sources said on Thursday.

There was a marked difference between the opinion of several large buyers and some major producers over price ideas.

“We have already been offered [a] rollover by several suppliers,” said one buyer, and several others told the same story.

Some producers, however, did not agree.

“We are targeting higher prices on very tight supply and poor margins,” said one producer.

Another said a rollover from March PE prices was not possible as availability was tight and demand strong.

“So far in April LDPE [low density polyethylene] demand is exceptional,” said another, who went on to say LDPE spot prices were at €1,300/tonne FD (free delivered) NWE (northwest Europe) minimum.

Traders told a different story. They talked of lower prices than last week, and blamed activity from at least one producer source for this.

“Last week I was selling LDPE at €1,290/tonne, this week I have to do €1,270/tonne,” said one.

Linear low density polyethylene (LLDPE) C4 (butene based) prices have also eased, according to some traders. They said levels had fallen to €1,250/tonne FD NWE, from last week’s level of €1,260-1,270/tonne.

At these price levels traders are finding it hard to replenish emptying stocks. Imports have been reduced, not only because of the increased duty from Gulf Co-operation Council (GCC) countries, which came into effect on 1 January 2014, but because of the time it takes for Middle Eastern sellers to shift volumes from one source to another when arbitrage opportunities arise, some sources said.

Monthly prices are still open for discussion at most PE accounts, and some sources saw the current discrepancy over April pricing between buyers and sellers as a negotiating ploy, and positioning ahead of serious discussions.

It does look as though negotiations will be difficult, however, with such diverse opinions in the market.

“My impression is that sellers are not willing to lose volume in seeking price increases,” said a distributor.

Buyers also argue that if prices roll over for April – and there is some firm evidence of this in weaker market segments, like high density polyethylene (HDPE) pipe for example – producers will have still increased their margin by €15/tonne, as the April ethylene contract fell by this amount.

Many LDPE and LLDPE accounts will not settle before the end of the month, on a retroactive basis, so this story could run for some time before settlements are firm.

LDPE and LLDPE are used mainly for film production and are used widely in the agricultural sector. HDPE is used in packaging and the manufacture of household goods.