Europe HDPE volumes up year on year in first quarter

Focus article by Linda Naylor

LONDON (ICIS)–European high density polyethylene (HDPE) producers have noticed improved demand in the first quarter of 2014 compared with the same period last year, sources said on Monday.

One major producer said its HDPE sales were up by over 23% year on year in January and February. Others said sales were better but not to this extent.

This contrasted with demand seen by traders, however. One described it as weak and others said it was hard to replace volumes with workable material.

“Spot prices that went up last week [end March] have come down again,” said one.

Spot prices have slipped back from around €1,230/tonne FD (free delivered) NWE (northwest Europe) to €1,210/tonne for several traders who complained they could not compete with domestic sellers.

Spot prices had been languishing below €1,200/tonne, however, so prices were still above those trading in mid-March. Levels of €1,230/tonne were still seen as valid but only at smaller accounts.

Upstream, cracker operators have noticed improved demand and some sources have begun to speculate on whether cracker rates will increase as downstream demand improves.

Part of the reason for better demand is said to be down to fewer imports and sources warn that an increase in cracker rates could lead to oversupply if imported volumes returned to the European market.

A couple of sources said that while April demand has started very strongly, it could fall off later in the month as holidays come into play and caution was necessary.

Polypropylene (PP) also tightened considerably in the first quarter as cracker cutbacks have more impact on propylene than ethylene, given the ratio of each monomer at the naphtha cracker, and also on lower imports.

PP demand also improved in the first quarter for European producer sources, several said.

Buying for HDPE is expected to remain cautious because of the uncertainty in upstream markets that have such an impact on polyolefin pricing. Neither buyers nor sellers want to hold high-priced stock in a potentially falling market.

Naphtha prices have remained volatile in recent weeks, and on Monday naphtha was assessed down by $9/tonne from Friday’s close. It has traded steadily above $900/tonne CIF (cost insurance freight) NWE, with only the occasional foray below this level in recent weeks, however.

Naphtha is one of the principal drivers of HDPE.

The upturn in demand in March and April leads to some optimism that European HDPE markets are picking up following many months of gloomy activity.

“March is the first time we have seen growth in the HDPE market for months,” said a producer.

HDPE is used in packaging, including bottles, the manufacture of household goods and also in the production of film.