Price and market trends: Europe HDPE buyers target lower prices

21 April 2014 00:00 Source:ICIS Chemical Business

European high density polyethylene (HDPE) buyers are targeting a decrease for April pricing, with some saying most HDPE grades are already lower than in March, sources said on 9 April.

The ethylene contract for April settled down, at €1,165/tonne FD (free delivered) NWE (northwest Europe), and polyethylene (PE) sellers in Europe had hoped to hold on to the €15/tonne monomer drop this month.

“I am struggling to see the rationale for an increase [in margin],” said one large buyer. “Has the market changed since last month? No.”

One change that several sellers noted in the April HDPE sector was an upturn in activity.

One major producer said its HDPE sales were up by over 23% in January and February 2014 compared with the same period in 2013.

This strong increase in volumes was put down to some extended production issues last year that had affected output, but also to fewer imports. Growth in the HDPE sector has been lacklustre for months if not years, said sources.

EU HDPE

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.

Buyers which buy regular volumes from importers said they had paid a rollover for April HDPE, but costs and sales prices at these accounts are lower than prices at many domestic naphtha-based European producer accounts.

Numbers below €1,200/tonne DDP (delivered duty paid) have mostly disappeared and net levels are reported around €1,210-1,230/tonne FD NWE.

HDPE PRICES EASE

Most HDPE prices have eased in line with the €15/tonne drop in the April ethylene contract, buyers and sellers confirmed on 10 April.

Smaller decreases of €10/tonne were also reported but this was thought to be available only for low-priced accounts.

Some sellers had begun the month asking for price hikes but it soon became clear that the polyethylene (PE) sector would not support an increase. “We could see after two days that this wouldn’t fly,” said one seller.

Demand is described as steady by most players, and according to forecast. HDPE remains the weakest polyethylene (PE) sector in Europe, but an upturn in demand has been seen in March and April, from a fairly dismal situation in recent months.

In the low density PE (LDPE) and linear low density PE (LLDPE) sectors, sellers are more confident of retaining some or all of the ethylene drop as availability is tighter than in the HDPE market.

By Linda Naylor