Europe PE margins under pressure on slow demand and increased imports

Author: Linda Naylor


Polyethylene (PE) sheetsLONDON (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