Europe PE buyers, sellers wrangle over 2020 discussions

LONDON (ICIS)–Polyethylene (PE) buyers are looking for better contractual conditions for 2020 but sellers are currently not considering anything worse than a rollover.

– 2020 supply to be ample

– Buyers target better conditions

– Some plan to buy more spot

Buyers expect to be able to negotiate more advantageously because of the amount of new capacity already on stream and due imminently, in the US and beyond.

Recent/upcoming North America PE plants

Company	Capacity ’000 tonnes	Grades	Location	Start-up
DowDupont Chemical	125	Bimodal HDPE/MDPE	Seadrift, Texas; St Charles, Louisiana	2018
Sasol	470	LLDPE	Lake Charles, Louisiana, US	Q1 2019
Sasol	400	LDPE	Lake Charles, Louisiana, US	Nov 2019
Formosa Plastics	800	HDPE, LDPE	Point Comfort, Texas, US	Q1 2020
LyondellBasell	500	HDPE	La Porte, Texas, US	Q3 2019
ExxonMobil	650	LLDPE	Beaumont, Texas, US	2019

Recent/upcoming PE production in other regions

SIBUR	1,500	LLDPE, HDPE	Tobolsk, Russia	End 2019/2020
SOCAR Polymer	120	HDPE	Azerbaijan	Feb 2019
Petronas	750	HDPE (400), LLDPE (350)	Johor, Malaysia	Q4 2019
Chandra Asri	400	LLDPE/HDPE	Cilegon, Indonesia	Q4 2019
Jiutai Energy	250	LLDPE/HDPE	Inner Mongolia, North	July 2019
Zhong’an Lianhe Coal Chemical	350	LLDPE/HDPE	Anhui, East China	H2 2019
Qinghai Damei	300	LLDPE/HDPE	Qinghai, Northwest China	Q3 2019
Zhejiang Petrochemical	750	LLDPE/HDPE (300), HDPE (450)	Zheiajang, East China	Q3 2019
Baofeng energy	300	LLDPE/HDPE	Ninxia, Northwest China	H2 2019
Kyanly Polymer	386	HDPE	Kyanly, Turkmenistan	2019
Orpic	880	LLDPE (440), HDPE (440)	Sohar, Oman	H2 2020

New US PE capacity is intended for export, and tariffs of 25% into China for US PE have meant US sellers have had to find alternative outlets, as Chinese buyers eschew material with such tariffs. Europe is an obvious contender for this material.

European spot prices have fallen significantly in recent months, leaving low-end prices firmly below the ethylene contract, even with this week’s €30/tonne drop in the new November monomer contract.

The new contract settled at €960/tonne FD (free delivered) NWE (northwest Europe), and most low-end commodity spot prices are now well below this.

The poor spread between ethylene and PE has been of concern for European producers for some time. Any margin in the market is at the cracker.

Some buyers plan to take more spot and less contracted volume next year, to be able to take advantage of the new spot material they expect to be offered. The shadow of 2015 still hangs over the market, however, admittedly less dark than in the past, but most converters need to be sure that they will be able to run their machines fully.

“You can’t always tap into spot product,” said one supplier. “You need to remain competitive but also you need to keep your machines running.”

Another supplier said it had already concluded initial annual settlements for next year at a rollover, but that there were many more to be done.

Click on image to enlarge

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

Pictured: ‘Polytunnels’ made of PE used for agriculture in southernSpain
Source: Jassen Todorov/Solent News/Shutterstock

Focus article by Linda Naylor