Europe PE prices down as naphtha soars

LONDON (ICIS)–Polyethylene (PE) prices in Europe are coming down in November but, in sharp contrast, upstream naphtha prices are surging, sources said on Friday.

Naphtha prices have increased by more than €40/tonne since the November ethylene contract settled, so some PE producers are concerned about December costs.

Against this strong upstream backdrop, PE prices have been settling down in both contracted and spot sectors, with a wide spread heard on most grades.

Spot linear low density polyethylene (LLDPE) has been under strong downward pressure, with prices moving towards €1,100/tonne FD (free delivered) NWE (northwest Europe), from €1,200/tonne last month.

Other grades were also losing ground, but the shadow of higher naphtha was looming over the market.

“This market is schizophrenic,” said a trader. “It’s very hard to read.”

“I’m hoping we adjust our [November] level [down],” said a buyer, “but that doesn’t mean we won’t see prices going up in December.”

European PE producers were concerned about the direction of naphtha, with one stating that “we are in difficulty because ethylene won’t collapse”, adding that December was expected to be a weak month.

Another producer said: “The situation on costs has escalated and the forecast for next month remains as high.

“Feedstock costs have climbed drastically and with oil having already increased by 8-10% versus October… Our margins are significantly compressing.”

A third producer also described downward pressure in the market, although adding that it was trying to “reassess” prices on the back of the feedstock’s development.

There was no sign of pre-buying ahead of a potential upward push in December, however.

“What we expect,” said a distributor, “is for December to be fairly quiet but then there could be an upward push for January.”

New capacities due on stream in North America are expected to be sending exports to Europe in the near future, but some sources were now expecting the bulk of imports to begin in the second quarter of 2018, not the first.

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

Pictured: Crops growing under polyethylene greenhouses in Granada, Spain
Source: Design Pics Inc/REX/Shutterstock