Europe PE gears up for higher prices on feedstocks, outages

Higher feedstock prices, some pre-buying in the UK, several planned cracker outages, and a force majeure at a major plant are leading some polyethylene (PE) sellers in Europe to expect higher prices in March.

Net prices are also lower than the ethylene contract in some cases. A couple of producers have already closed order books on some PE grades, and one has said extra volumes for February will incur a surcharge of €50/tonne. Some spot prices are looking up, but sentiment is also weighed down by fresh import volumes from the US, and not all sellers are convinced prices will go up in March.

Brent crude prices have increased steadily in recent weeks and, while naphtha has been lagging behind, an upturn has been seen there too.

Any move in naphtha will be used as an argument for price moves in the upcoming ethylene contract for March, and any move in the ethylene contract is likely to influence pricing in the PE market. Some buyers have ethylene-linked PE contracts, so any monomer move automatically transfers to these PE prices.

A portion of most buyers’ portfolio is for freely-negotiated pricing, and upstream costs may play a role in defining the PE price. Higher upstream costs would point towards upward pressure in March. Whether this is feasible depends on the grade of PE in question and the level of demand.

Some grades will be hard to lift, even with higher feedstocks, as inventories are high. Metallocene linear low-density polyethylene (MLLDPE), for example, is in oversupply and has been the only product reported with some downward price movement for monthly February business so far.

Its particular properties have led to a great deal of investment globally, and sources agreed it will take time for all the new capacity to be absorbed. High-density polyethylene (HDPE) has been stronger than the wider PE market for some time, and spot sellers of HDPE injection have noticed increased demand amid tightening supply.

In January, spot imports of HDPE injection and blowmoulding stood at around €1,000/tonne DDP (delivered duty paid), according to sources; while talk of this number was widespread, some spot sellers and large buyers said they had not been confronted with such levels.

There has been a lack of some regular Egyptian HDPE imports into Europe in February, and an earlier force majeure in France may have had an impact on supply.

Not all buyers agreed that prices had increased a little, and some still saw evidence of better deals to come from the US. A mixed picture also came from the C4 (butene based) linear low density polyethylene (LLDPE) sector.

Buyers of low density polyethylene (LDPE) were sometimes looking for material following the declaration of force majeure from SABIC’s Wilton plant in the UK.

Expectations of a potential upturn in China, following the holidays, was also affecting sentiment somewhat in Europe. The question of how many imports were already available in Europe from the US was also a divisive matter.

Sources generally agreed that C4 LLDPE and MLLDPE was widely available from the US, and more would be coming on stream, but there was disagreement in the HDPE market. Some buyers said they had been offered material below €1,000/tonne DDP, and others that they had seen no evidence of anything below €1,050/tonne in the spot market, and that the quantities available were meagre.

Imports from the US to Europe showed an increase for November, but the whole picture is not clear.

February monthly prices are largely rolling over, and spot prices are mixed.