Europe PE buyers, sellers wrangle over 2020 discussions

Author: Linda Naylor

2019/11/01

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

-

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