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