Europe PE margins under pressure on slow demand and increased imports
Linda Naylor
02-Jun-2016
LONDON
(ICIS)–Producers’ polyethylene (PE) margins in June are
under pressure as demand slows and an increased volume of
imports is offered to the market, sources said on
Thursday.
Some PE producers were said to be looking to cover the
€25/tonne increase in the June ethylene
contract, while others were already offering rollover to the
market this month.
Demand in May slowed down considerably, and sellers were
left with volumes, a situation some had not seen for many
months.
The tight, even short, situation in 2015 had led to stock
building from converters, and expectations of at least
stable, if not lower, prices to come, led to many taking the
decision to work from stocks.
At the same time, imports increased in volume, and those PE
grades that are most susceptible to imports, namely C4
(butene based) linear low density polyethylene (LLDPE) and
high density polyethylene (HDPE) film, have seen downward
pressure in spot pricing.
C4 LLDPE spot prices are now down to €1,200/tonne FD (free delivered)
NWE (northwest Europe) in many cases, and HDPE film levels
are not far behind.
Other grades, like metallocene LLDPE (MLLDPE) were not seeing
the same sort of pressure, and buying sources expected to be
paying an increase for this in June. Spot prices in this
sector are still in the mid-€1,400s.
“Do I want to pay an increase in June?” asked one large
buyer. “No. Do I want to keep my machines running?
Yes.”
Low density polyethylene (LDPE) was also balanced to tight,
said sources, and spot prices here were holding.
Sellers were not too perturbed by May demand, as they
expected June to be better, and stocks were under control.
The spread between ethylene and PE is also strong.
“June demand will be better than May simply because there are
more working days,” said one producer.
Shutdowns in France, because of strikes, were also causing
concern for some grades, although the overall impact was less
than many had expected.
Both INEOS and Total Petrochemicals have called force majeure
on PE and polypropylene (PP) from French assets.
Some sellers noted extra demand for applications such as caps
and closures from France, and there were still some concerns
that start-up at some of the stricken sites would take time,
as some crackers were down. For the moment, however, there
was less concern over the situation than might have been
expected, said several sources.
June pricing is not yet under full discussion, and many large
accounts settle only at the end of the month, but for the
moment, buyers were relatively relaxed.
PE is used in packaging, the manufacture of household goods
and also in the agricultural industry.
Focus article by Linda Naylor
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