Europe LDPE spot prices at lowest point since 2012, outlook unclear

Author: Linda Naylor

2019/01/11

LONDON (ICIS)--Low density polyethylene (LDPE) spot prices are trading at their lowest point since 2012, and even lower - to the level of 2010, according to some buyers.

- LDPE spot down to 2012 levels

- Demand slow

- Crude up, naphtha little change in euro terms

Photo by Design Pics Inc/REX/Shutterstock (8417094a) Blue plastic water containers with white lids attached by rope Seoul, South Korea VARIOUSSome LDPE prices have broken the €1,000/tonne FD (free delivered) NWE (northwest Europe) barrier this week, they said, although not all grades were available at this level.

Some offers were as high as €1,100/tonne, but it was not clear how much business was being done at either end of the range talked.

Demand has started off the year poorly, and this, coupled with the drop of €40/tonne in the January ethylene contract, led to an immediate expectation of lower prices.

2012 was a year that saw very poor netbacks for European polyethylene (PE) producers and some production was closed permanently. Many of these closures were on high density polyethylene (HDPE), where profits were worst. HDPE is now a net imported product into Europe.

Company PE grade Location Capacity '000 tonnes Status Date
Dow HDPE* Tessenderlo, Belgium 190 Closed End 2012
Versalis LLDPE** Priolo, Italy 150 Closed Sep 2013
LBI HDPE Wesseling, Germany 100 Closed Q3 2013
Eni LDPE*** Gela, Italy 150 Closed End 2013
Borealis HDPE Burghausen, Germany 175 Closed End 2014
Total HDPE Antwerp, Belgium 70 Closed End 2014
Repsol HDPE Puertollano, Spain 90 Closed  Q2 2015

*high density polyethylene, **linear low density polyethylene, ***low density polyethylene

Since then, naphtha is more competitive, but ethane-based production still provides better netbacks.

Lower naphtha has meant better margins for cracker operators, but the spread between ethylene and PE is very low at present, even with the most recent €150/tonne drop in the ethylene contract in December and January combined.

December PE producers managed to claw back some spread at freely negotiated accounts, as the ethylene contract fell by €110/tonne, and PE prices lost around €80/tonne.

It was not clear whether sellers could manage a similar coup in January, as the month is a short one.

February remains a conundrum.

Crude prices have soared by around $10/bbl in days, and these higher costs could have an impact on ethylene. Naphtha is the key to ethylene contract negotiations, however, and naphtha is still trading below its point when the January ethylene contract settled, in spite of the sharp rise in crude.

As well as upstream prices to consider, imports are also expected to grow in volume, as new PE capacity comes on stream in North America.

January monthly PE contracts are not under full discussion in many cases. A drop of €20/tonne is already clear, but buyers consider that this is just not enough.

“We’ve been offered minus 20 [€20/tonne],” said one. “We will not accept that.”

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

Focus article by Linda Naylor.

Picture source: Design Pics Inc/REX/Shutterstock