Inflection point could have been reached in Europe PE

LONDON (ICIS)–An upturn in demand and higher spot prices in the European polyethylene (PE) market this week are leading to speculation over whether an inflection point has been reached, sources said on Friday.

“It’s been incredibly hectic in the past two days,” said one producer.

“We are at an inflexion point… now we have this opportunistic type of buying behaviour but we are mostly sold out.”

“This is a typical buying pattern when things can’t go lower.”

The producer added that a lower ethylene contract was no longer a given, as naphtha prices were firming. Naphtha was now trading in the mid-to-high $400s/tonne CIF (cost insurance freight) NWE (northwest Europe), and crude prices have also rallied.

A second producer closed its order books for October on Friday.

Traders were also surprised by the level of demand, and some said they were sold out and now offering only for November.

“I didn’t expect a turn like this so soon,” said one.

An element of doubt was expressed by some buyers, who suspected the current upturn to be due to scaremongering by sellers who were playing on the fears of buyers that had sometimes been short of product earlier in 2015.

Whatever the reason behind the upturn seen this week, spot prices have increased, along with activity.

Some producer sources were more cautious, saying that PE supply could get long if production rates at the cracker were not cut in the near future.

PE imports remain reduced in volume, and traders have been cautious in buying, fearing too much stock in a falling market.

Clarity over whether the PE market can turn around will depend on how strong demand turns out to be by the end of the month.

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

Focus article by Linda Naylor