LONDON (ICIS)--European polyolefins players have adopted a wait-and-see attitude as trading activity has slowed ahead of the July upstream contract settlements.
In both the polyethylene (PE) and polypropylene (PP) markets there has been limited activity on the spot market, with prices stable across the board last week.
“At the moment everyone is waiting to see what ethylene will do,” said one PE trader.
“Demand isn’t fantastic, it was at the end of May/start June, but it's slowed down now. I think everyone has bought what they need,” added a separate seller.
Lower naphtha prices, combined with length in ethylene supply is contributing to the hesitancy for PE buyers, as some eye opportunities for lower prices next month.
However, there is also a lack of urgency on the PP side, despite the tighter propylene supply, which has supported PP price increases throughout the month.
There remain some June PE retroactive contracts being discussed, with prices above the monthly monomer increases agreed for some grades.
There is already appetite from sellers for margin recovery in July, with any specific targets to be announced following the monomer settlements.
Producers continue to cite poor margins, with the spread between ethylene and PE on some grades low.
Sellers have lost margin throughout the year, and are citing much lower levels than in previous years.
Despite the recent hesitance on the spot market, underlying demand remains healthy for both PP and PE.
Demand traditionally increases in the summer period, linked to higher consumption from some seasonal applications.
PP supply is finely balanced, with some tightness on certain grades for both co-polymer and homopolymer.
Both low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) supply is ample, with lower imports having a balancing effect in recent weeks.
However, there is some tightness in the high density polyethylene (HDPE) market, amid lower imports and European sellers reducing production amid higher margins elsewhere.
Given the strength in the HDPE pipe market, some European sellers have turned their attention there, increasing production for pipe.
Supply and demand, along with the upstream ethylene/propylene prices, will all contribute to July pricing movements.
The upstream settlements are expected before the end of the month, with polyolefin players gearing up for July contract negotiations.
PE is used in packaging, the manufacture of household goods, and also in the agricultural industry.
PP is used for packaging, ropes, carpets, plastic parts, loudspeakers and automotive parts.
Pictured above: Agricultural polytunnels in Huelva, southern Spain Source: Jassen Todorov/Solent News/REX/Shutterstock
Focus article by Katherine Sale
Clarification: Re-casts headline