Europe PE players square up to October price discussions

Linda Naylor

02-Oct-2014

Focus article by Linda Naylor

Tough pricing talksLONDON (ICIS)–Polyethylene (PE) players in Europe are positioning themselves for October pricing discussions following last week’s settlement of the ethylene contract at a rollover from September, several said on Thursday.

Most discussions are only just beginning.

“They [producer] started with a plus €10/tonne, so I bid at minus €30/tonne,” said one large buyer who planned to leave serious negotiations until next week at the earliest.

Much depends on which grade of PE is under discussion, as the strong dollar has led to fewer imports and the possibility of attractive export business, leaving some grades tight.

Fractional melt low density polyethylene (LDPE) prices could reasonably be discussed at slightly higher levels than September, according to some sources, while some commodity high density polyethylene (HDPE) is already being negotiated at a rollover.

“Some of the big film buyers put a brake on purchases last month,” said one producer, “and now they need to buy. There could be some euros [up] in it.”

LDPE and HDPE bimodal film grades have tightened into October, while HDPE unimodal remains available. Similarly, bimodal HDPE blowmoulding grades are tight, following extended problems in the US and fewer imports into Europe, while unimodal grades are widely available.

“There is certainly enough 5502 [commodity HDPE blowmoulding grade] in the market,” said one trader.

Traders have had difficulty replenishing stock levels in recent weeks, but the recent spike in the dollar versus the euro is making it even harder at the moment.

“I think we are going to see the effect of the current dollar in about six weeks’ time,” said one trader, as bookings at the current dollar level would be limited.

The stronger dollar has led to more exporting from European producers.

“What I am seeing at the moment is European producers excited to sell to me,” said one Turkish buyer.

“We are selling to South America, the US, as well as Europe,” agreed another PE producer.

Some sources expected product availability to tighten under current circumstances, but there were also still concerns over underlying demand and economies in the euro zone. France in particular was an area of concern for some sources.

One producer is seeing very strong October demand, with the possibility of hikes of as much as €50/tonne, but sources agreed that the starting-point of discussions was important.

Lower crude oil and naphtha prices were also playing on market sentiment. On Thursday Brent crude slipped below $92/bb and sources expected naphtha to be affected this erosion. Indications on Thursday morning were at $781-785/tonne CIF (cost insurance freight) NWE (northwest Europe).

“With naphtha going down, everybody thinks next month they can buy at the same price so why buy now?” said a distributor. “Things are not easy at the moment.”

LDPE spot prices remain in the mid-to-high €1,200s/tonne FD (free delivered) NWE, with C4 (butene based) linear low density polyethylene (LLDPE) at similar levels. HDPE unimodal film is still languishing in the mid-€1,200s/tonne, while bimodal bids are as high as €1,400/tonne for specific grades.

Discussions for October are often protracted, as end-month retroactive settlements are still a feature of many markets.

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

LLDPE BU SPOT vs ETHYLENE FD NWE CP-20141002

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