Second European PE producer closes September order book

LONDON (ICIS)–A second European producer has closed its polyethylene (PE) order books for September on the back of very strong demand, a company source said on Friday.

“We have closed order books [because] demand is much higher than expected. August was weak, everyone came after August with clear underlying demand,” the producer said.

“We saw very, very strong order intake in the first two weeks [of September], so now we are obliged to close the books, we just can’t supply more,” it added.

Limited imports due to the strong US dollar together with buyers building inventory following the September ethylene drop has seen several producers comment on improved September demand over the last two weeks.

Versalis announced the closure of its order books for September last week, again citing strong demand as the reason.

However, strong demand in monthly business has not translated through to all grades of spot material, with low density polyethylene (LDPE) and high density polyethylene (HDPE) blow moulding grade both seeing downward movement in spot prices because of weak demand.

By contrast, HDPE film spot prices moved up on the back of market tightness as material destined for Europe was being sent elsewhere.

“Middle Eastern [producers] are making more money sending [HDPE film] elsewhere because of the exchange rate and import rates,” a trader said, adding: “We re-exported HDPE to Israel, which is rare”.

Players in both the monthly and spot markets are looking ahead to October and the outcome of the C2 contract settlement.

Several sources commented that it has become increasingly difficult to predict where the PE market will go in the fourth quarter.

“In the last two years we see that demand is a little bit unpredictable – there is no visibility,” a second producer said.

“Previously consumption was quite similar from one year to the other. September, October up, November and December down – today it’s not the same,” the producer added.

Better arbitrage opportunities with different regions caused by the weak euro could cause prices to rise because of tightness in the European market.

In addition, despite crude and naphtha still at low levels, a PE buyer highlighted the fact that the change in the dollar/euro exchange rate means naphtha prices are now currently higher than when the September C2 contract settled.

One producer said it would look to roll over prices in October even if ethylene dropped because of the current strong PE demand levels it is experiencing.