Europe PE tight supply putting more pressure on buyers

Source: ICIS News

2019/04/16

LONDON (ICIS)--Tight polyethylene (PE) supply for some grades in Europe is leading to stronger pressure on buyers for April pricing.

  • LDPE, LLDPE tighter
  • Production issues affect supply
  • Naphtha stronger

Last week, Dow stopped all new orders for April, adding a supplement of €70/tonne, compared to March business.

Other sellers are still talking of plus €50/tonne for end-month retroactive business.

Buyers’ early expectations for April settlements were at €30/tonne increase.

In some cases, this is still the case, but low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) have been but tightening due to some production issues and fewer imports, leading to stronger targets from some producers.

“At the end of April we will have to pay more than 30 [€/tonne increase],” said one buyer.

“We are fighting with the suppliers. 30 [€/tonne increase] is a given.”

In the spot market, LDPE and C4 (butene based) LLDPE prices have risen sharply.

LyondellBasell’s unplanned outage of its 320,000 tonne/year plant in Aubette, France, at the Berre complex, has exerted pressure.

A couple of unplanned cracker issues in Germany and Italy have also led to some tightening, according to buyers, but these issues have not been confirmed with the producers concerned.

In the C4 LLDPE market, supply is tightening due to lower imports.

Some buyers have been informed they will not be getting their full expected supply in April, and also May.

Middle Eastern supply was less available and, meanwhile, US imports were also less in evidence, although sources questioned how long this scenario would last, with substantial new capacity coming on stream.

Higher naphtha prices were also putting pressure on buyers for May, as naphtha is a driver for ethylene and subsequently PE prices.

Few sources expected this situation to last long.

Unplanned production issues would be resolved, the planned cracker outages that are expected to affect PE output would be over, and higher prices in Europe would attract more imports.

But there was some expectation of tightness in May at least.

High density polyethylene (HDPE) has not been affected as much, and here netbacks have been better for European producers than on LDPE and LLDPE.

End-month settlements are not expected to be done soon, and the new May ethylene contract is likely to settle before PE is finally settled for April.

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

Picture source: Kurt Amthor/imageBROKER/REX/Shutterstock

Focus article by Linda Naylor