US HDPE hikes weigh on sentiment in Europe

LONDON (ICIS)–High density polyethylene (HDPE) buyers have been able to get good deals for US imports in 2016, but proposed hikes in the domestic US market for September – based on tight supply – is leading to concern for some buyers, sources said.

Europe moved into a net importer position in 2015, according to some sources. Following a series of capacity closures, planned when profitability was very low, many buyers now rely on imports to supplement their volumes.

Until relatively recently, it was in the film grade sector that dependency was highest for imports, but blowmoulding has entered that sphere, and the US has been providing good volumes in 2016.

Recent data released by the American Chemistry Council (ACC) revealed a strong upturn in HDPE exports from North America.

HDPE imports into Europe have been strong in the first months of 2016, but sources are waiting for the imminent release of June data to see how the situation is evolving.

June is still predicted to see high import volumes, but many sources expect these to begin to decrease by September as arbitrage opportunities fade.

European HDPE prices are low in global terms and traders are unable to cover fresh sales at a level that would work with today’s prices, they said.

Volumes from the US are unlikely to be offered at workable levels, as several US producers are proposing a 5cts/lb hike for September buyers. It is not clear how successful they will be, said sources, but European buyers do not expect HDPE exports to continue as tightness had prompted the proposed hikes.

Several HDPE maintenance outages are planned for the coming weeks in Europe, and because these have been planned, they should not cause too much disruption to the market. Extra supply is not expected to be available.

Some blowmoulding grades have been tight for a while, and some buyers have been changing their buying habits and begun to take spot imports into stock to ensure a continuous supply. This is an option they did not have in 2015 as plant outages exacerbated an already tight market as crude oil and the euro plunged.

This has not been plain sailing, said one large buyer, whose downstream customers are nervous taking in imports.

With Europe as a net importer, however, this is a situation that is likely to become more frequent.

Polyethylene (PE) sellers in the wider market are hoping for an upturn in pricing in September, but there is still a potential hangover from imports to consider, and the fact that higher European prices will inevitably attract more imports.

HDPE is used in packaging and the manufacture of household goods.

Focus article by Linda Naylor