Europe PE buyers target €100/tonne drops in February

LONDON (ICIS)–Polyethylene (PE) buyers in Europe are targeting price drops of €100/tonne in February and some are confident of success, several said on Friday.

The February ethylene contract fell by €70/tonne, and most sellers have already relinquished the full monomer amount to buyers, but end-month converters are looking for more.

“Customers are looking for 100 [€/tonne down],” admitted a producer. “I think they’re looking for revenge.”

In 2015 buyers had to pay increase far in excess of any upward movement in upstream prices, and producers’ margins remain very healthy.



The above chart shows the spread between ICIS FD EU low density polyethylene (LDPE) gross numbers compared with the prevailing ethylene contract.

Spot PE prices have tumbled during February as imports have increased in volume, and the price move of one major producer at the beginning of the month, for monthly contracted business, at an offer of minus €100/tonne set the tone.

Not all sellers were yet giving in at minus €100/tonne, however.

“We tried to keep the decrease to €50/tonne,” said one producer, “but it soon became clear that that wouldn’t happen so now we’re at minus 70.”

“I expect minus 100 [€/tonne] across the board,” said a PE buyer.

There remains an element of caution in the PE market, as buyers recall the events of February/March 2015, when buyers returned at the bottom of the pricing cycle to buy product that soon tightened and became unavailable, and prices soared.

The spread between ethylene and PE doubled from their low in the fourth quarter 2014, hence the producer comment about buyers getting some revenge.

Monthly prices for contracted business will not settle before the end of the month.

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