Europe PE spot prices slide on lower February expectations

Focus article by Linda Naylor

LONDON (ICIS)–Price ideas for European polyethylene (PE) spot prices are sliding and bids are now being made based on expectations for February, sources said on Friday.

“There is no market price,” said a distributor. “Whoever has stock is discounting.”

Low density polyethylene (LDPE) prices above €1,050/tonne FD (free delivered) NWE (northwest Europe), on a net basis, the price commonly mentioned last week, are no longer feasible, and while most sources gauged €1,000/tonne to be a potential market price this week, there was also talk below this.

Buyers’ inventories are thought to be very low. As February prices are expected to be lower, only minimal buying is taking place.

Several sellers said they have had calls from desperate buyers this week, who need an extra truck as they have miscalculated the volume they need, and these buyers must pay a premium.

“One guy called me on Wednesday for a delivery on Friday,” said a trader.

In the C4 (butene based) linear low density polyethylene (LLDPE) market, prices of €1,100/tonne FD NWE on a net basis have still been possible in such cases this week, but even for C4 LLDPE, sentiment is moving below €1,050/tonne.

The February ethylene contract is expected to go down but this week’s slide in the euro value is leading to increased speculation over how much the drop can be.

There had been talk of a potential price fall of €100/tonne, based on lower crude oil and naphtha prices. As these commodities are traded in dollars, buyers in euro terms will be faced with higher costs.

Ideas are around a €60-80/tonne drop from some PE players are bandied about at present.

The January ethylene contract price stands at €880/tonne FD NWE, and cracker margins are still thought to be good.

The weakness of the euro is expected to prevent a pick-up in imports into Europe in the short term, and exports are expected to continue strong.

Export opportunities are dwindling, however, as Asian prices crash and the upcoming new year is expected to dampen buying interest further.

The February ethylene contract is expected to settle next week, and some producers are expected to attempt to improve margin again, after successful attempts in the past few months.

Large buyers said they would push for the full ethylene drop in February, arguing that producers’ margins were already strong enough. Much will depend on the level of demand next month.

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