Europe PE prices fall on lower ethylene costs

LONDON (ICIS)–Polyethylene (PE) prices in Europe are falling in line with the decrease in the February ethylene contract this month, but some buyers are pushing for more, sources said on Friday.

The February ethylene contract settled last week at €830/tonne FD (free delivered) NWE (northwest Europe), down by €70/tonne from its January level.

Several major PE producers said this week their aim was to keep the monthly polymer price move in line with the ethylene price fall.

“We are giving the ethylene [drop],” said one.

Some buyers did not see this as enough, however, and were pushing for a three-digit price decrease in February.

PE producers are in general very relaxed, however, and do not see the need for prices to go down further.

“Demand is good, stocks are low,” said one.

“My feeling is that 2016 won’t be that different to 2015,” said another.

2015 will go down in the annals of PE history as an exceptional year. Product supply was so tight that some lines were brought to a halt, and prices soared.

While supply and demand are now balanced, and imports are arriving in Europe, there is an underlying fear that tightness could emerge again.

“There are no supply issues so far…but [producers have] created a sense of fear,” said one buyer.

“Force majeure season hasn’t started yet,” said another wryly.

“The only difference I can see this year is that there is some Iranian [PE] around,” said one of the producers, “but I can’t see that having much of an impact at the moment.”

Volumes of Iranian PE have been offered, but they are not thought to be great, and there is some hesitation when it comes to taking them because of potential banking issues.

February PE demand is good, according to producers, but December and January fell short, said some. Most are satisfied with their supply/demand position.

Some upcoming shutdowns, stable ethylene and higher crude prices are leading to expectations of stability into March, although most sources accepted that there was time for conditions to change before the settlement of the next ethylene contract.

Spot prices have been lower for February, and exports from Europe are heard at lower levels and are also more widespread than formerly, suggesting an increase in inventories at the producer level.

Lower prices are likely to put a brake on imports, said sources, making further barriers to potential importers. With Lunar New Year celebrations leading to an increase in volumes to Europe at present, most sources expect this to ease once Asian markets get back to normal after the holidays.

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