Some European PE prices below ethylene contract as upstream strong

LONDON (ICIS)–European high density polyethylene (HDPE) injection spot prices are continuing to slip and low-end levels are moving below the level of the current November ethylene contract, sources said on Tuesday.

Imports were sometimes available below €1,000/tonne DDP (delivered duty paid), said buyers, and some spot sellers agreed.

European low-end HDPE injection prices tended to move around the €1,000/tonne level, with the lowest offers said to be available for large parcels only.

This is below the current ethylene contract of €1,025/tonne FD (free delivered) NWE (northwest Europe).

Many HDPE injection buyers are fully covered and have little need to buy.

Sources were beginning to question how long such a situation could last, particularly as naphtha has risen by around €50/tonne since the last monthly contract settled, and naphtha was trading in the mid-to-high-$500s/tonne CIF (cost insurance freight) NWE.

Some PE producers were already considering price hikes for December, based on higher costs, and not all PE grades were in the situation of HDPE injection.

“The situation on costs has escalated and the forecast for next month remains as high,” said a producer.

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

Others expressed a similar concern, and there was some talk of an upward price push to restore margins.

Few buyers could expect higher prices in December: it was a short month, they held enough stock, and momentum for upward prices was slow, they said.

Some expected an upward push in January, however, given the discrepancy between upstream prices and polymer prices.

Not all PE prices were as low as for HDPE injection, and most remained above the November ethylene contract, but naphtha and crude oil were still exerting pressure on costs.

Upcoming new production in North America and India could also be affecting Europe in 2018, and some sources saw a limit to how much prices could increase by in the mid-term, once new sources of imports began to arrive.

Most of the new capacity on stream was from ethane-based ethylene, and buyers expected it to have an impact in Europe some time during 2018.

“We would be naive to expect imports to arrive on 1 January next year,” said a trader.

“But they will arrive at some point.”

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

Pictured above: HDPE produced by SABIC
Source: SABIC