Europe spot PE prices edge up, monthly price disputed

Focus article by Linda Naylor

LONDON (ICIS)–Polyethylene (PE) spot prices in Europe are stable to slightly higher in some cases in May, but monthly prices are still disputed, market sources said on Monday.

Low density polyethylene (LDPE) spot business is now considered feasible at €1,300/tonne FD (free delivered) NWE (northwest Europe), a level only seen possible at small accounts earlier in May. 

Reports of €1,260-1,270/tonne is all but gone, and some sources said €1,280-1,300/tonne was now the going rate for LDPE at large accounts on a net basis.

Some sellers are said to have changed track half way through the month, adding €20/tonne on to extra business, having initially offered a rollover, said some sources.

“My supplier who had said plus €20/tonne for early May is now talking about another plus €20/tonne for the end of the month,” said one smaller LDPE buyer, who estimated that its final price could be €1,320/tonne FD at the end of the month.

LDPE sellers said they had been encouraged to ask for higher prices by the stronger-than-expected level of demand in May.

Large buyers that settle at the end of the month are keeping a close watch on upstream naphtha movements and several said that if naphtha keeps low they will not entertain any form of increase, in fact they said they would not pay higher prices in any case, as availability was not short.

Some high density polyethylene (HDPE) buyers are even now targeting the €5/tonne drop seen in the ethylene contract price for May.

Naphtha prices have been volatile in recent days, and on Friday they closed at $923-925/tonne CIF (cost insurance freight) NWE.

Linear low density polyethylene (LLDPE) prices were not seeing the relatively strong upward movement of LDPE, but some slightly higher spot numbers were seen in the C4 (butene-based) market. A level of €1,250/tonne FD NWE was no longer seen as feasible for low-end business, but this has lifted only modestly, to €1,255-1,260/tonne, on a net basis.

The C4 LLDPE market relies heavily on imports, with some sources saying around 90% of this commodity PE grade used in Europe is imported. Imports have been cut back in 2014, and this is thought to be due mainly to the increase on import duty from GCC countries on 1 January 2014, from 3% to 6.5%.

Middle Eastern suppliers seem to be targeting better netbacks in Asian markets.

LLDPE grades that are slightly more specialised than C4 LLDPE are not in short supply in Europe, and competition within these grade slates and substitution remains high.

This also applies to HDPE and polypropylene (PP) imports, both of which have seen a decline in 2014 since the additional duty was implemented.

One of the main reasons producers are finding it so hard to pull prices up in Europe at present, in spite of the lack of imports, is the expectation that June prices will at worst, roll over, that there is no chance of higher prices, so buying is pitched accordingly.

These expectations are based on upstream naphtha price movements, but also events in the ethylene market.

The May ethylene contract settled down by €5/tonne, at €1,160/tonne FD NWE. Spot levels are well below this, below €900/tonne in most cases, yet PE sources do not expect much change to the June monomer contract.

This lack of upward trend upstream leaves PE buyers unconcerned over availability issues and an expected lull in demand in summer means that few will be buying for stock.

“Nothing is tight,” said one large buyer, “and demand is still not brilliant.”

Monthly discussions are expected to drag on for some time as retroactive settlements remain firmly in place at many large accounts, and it looks as though the recent trend of tussling over the odd few euros will continue.

PE is used widely in the manufacture of household goods, and in the agricultural and packaging industries.