Europe PE market visibility murky for September

LONDON (ICIS)–Polyethylene (PE) players are looking toward September, with expectations of more material arriving from the US and demand remaining uncertain.

• Low-priced US PE offered
• Asia prices down
• Cautious buying to continue

A series of planned and unplanned cracker outages has not had much impact on the European ethylene or PE markets. Spot ethylene has traded at contract minus 13.5-14% this week

Low end PE spot prices remain below the current ethylene contract price in most cases, and offers of US material are keeping pressure on the market, particularly in the high density polyethylene (HDPE) sector.

Competition between US sellers in Europe is adding to the cautious attitude seen in August.

Low demand is also a feature of the market.

“Volume in the market is down significantly,” said one large PE buyer.

End-month August PE settlements are now being done, and some buyers are reporting a drop of €10/tonne, slightly lower than the rollover that was offered earlier in the month, in spite of a similar increase in the August ethylene contract.

Some buyers are expecting to be faced with a price hike in September, as cracker outages potentially tighten upstream supply but, with naphtha down by close to €50/tonne lower than when the August ethylene contract settled, a decrease in the September contract is unlikely to lead to a PE increase.

For the moment there is no sign of any supply issues.

A weak situation in Asia is also impacting sentiment in Europe.

Major southeast Asian PE-importing countries such as Vietnam, Indonesia and Malaysia were inundated with attractive offers for US as well as Middle East cargoes, particularly for linear low density polyethylene (LLDPE) film and HDPE film grades.

Several deals for US HDPE film cargoes were concluded at $870-890/tonne CFR (cost and freight) SE (southeast) Asia with estimated arrival in September.

US offers of HDPE are talked in the low-to-mid €900s/tonne FD (free delivered) NWE (northwest Europe), including delivery, costs and 6.5% duty, meaning that a price of €925/tonne would loosely be the equivalent of around $900/tonne CFR Europe.

Such numbers and slightly below have been seen offered in Turkey this week.

Many players in Europe are still on holiday, so feedback has not been consistent, but an element of caution is expected to continue into the coming days. The settlement of the September ethylene contract – expected next week- will bring some certainty to the market, but cautious buying is not expected to change.

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

Picture source: Yorgos Karahalis/AP/Shutterstock