Europe May PE pricing still discussed but buyers relaxed

23 May 2014 11:54 Source:ICIS News

Focus article by Linda Naylor

LONDON (ICIS)--May polyethylene (PE) prices are still under discussion in many cases, but buyers are fairly relaxed as they do not expect higher prices in June, sources said on Friday.

Pricing discussions have been tough so far for the month.

Several sellers began the month with higher targets, in spite of the €5/tonne reduction in the May ethylene contract, but these have now dipped to plus €20/tonne at most by the end of the month, and some producers have not pushed beyond a rollover, pocketing the €5/tonne from the ethylene drop.

Low density polyethylene (LDPE) availability is tight, or would be, say some sources, if demand was better. Prices are quoted at €1,280-1,300/tonne FD (free delivered) NWE (northwest Europe) on a net basis, with some producers saying their net business is now above €1,300/tonne. At the beginning of May, LDPE net prices were trading at €1,260-1,280/tonne.

“Demand is not fantastic,” said one producer, while another was still pushing to achieve hikes in May.

“We are concentrating on plus €10-20/tonne,” the second producer said, and such increases were based on what it saw as better-than-expected demand in May.

“May has gone quiet now,” said another producer. “Customers have completed their purchasing plans and are now considering June.”

In spite of this, many retroactive accounts have still to settle May. Few large buyers expected to settle at anything worse than a rollover, with some saying the only real upward pressure is coming from the EVA (ethylene-vinyl acetate) sector, where product availability is tight and price increases sharp.

The practice of retroactive pricing in LDPE and linear low density polyethylene (LLDPE) in particular is still rife in many parts of Europe, and often clouds pricing issues as they often only settle on the last day of the month. There have been several attempts to eliminate it over recent years but progress has been slow and intermittent.

While buyers remain relaxed about June pricing, some upstream players in the ethylene sector have begun to talk about price hikes for the new June monomer contract, based on higher naphtha prices as opposed to the supply/demand situation in the monomer market.

Spot monomer remains well below the current contract level of €1,160/tonne FD NWE, with spot ideas around the €900/tonne mark, up from a low of €850/tonne a couple of weeks ago.

Naphtha closed at $954-956/tonne CIF (cost insurance freight) NWE on Thursday. On 6 May it closed at $924-926/tonne. Naphtha is a major driver of ethylene prices.

PE prices have followed the monomer contract closely in recent months, and any movement in the new June contract could be expected to affect PE pricing next month.

PE players expect little change to the June ethylene contract, while some monomer players are talking of increases of up to €50/tonne. A new contract is expected next week.

PE is used in packaging, household goods and agricultural sectors.

By Linda Naylor