Europe PE spot prices down as US traders step in with lower numbers

Author: Linda Naylor

2019/11/07

LONDON (ICIS)--Europe polyethylene (PE) spot prices are under downward pressure again, and new competition from US traders is exacerbating the situation, according to local sellers.

Three new US-based traders are said to be offering large volumes of low-priced product to many players across Europe.

“It looks like they’ve bought a directory and are approaching all the buyers,” said one source.

It is this scattershot approach that is sending shock-waves through the market, as it is very hard to define how much material is actually being offered.

Sources often complain that reports of imports available get wildly exaggerated as the same parcel may be offered at many different accounts, growing in volume as it is touted round the market.

US exports have been growing in volume, however, and the 25% duty on US PE into China means it needs to find different outlets, and Europe has become one of those outlets.

New offers for some PE grades in November are at €880/tonne delivered for prompt delivery, while local sellers follow in some cases, in some grades it has not been necessary.

Demand has been a problem for many smaller sellers in recent weeks, and even food packaging – a sector that has withstood volume erosion- is now affected, according to several sources.

Demand for contracted volumes remains better as buyers aim to reach end-year volume targets that often have an impact on the price of material bought throughout the year, but smaller sellers are not seeing this.

Specialities are also withstanding demand destruction better than commodities.

“I see no sign of recovery for quarter one,” said a smaller seller. “If I can sell, I sell.”

In the contracted market a clear minus-€30/tonne was emerging for early business, but buyers were looking for more, and some hinted at special deals alongside contracted pricing.

Recent data showed where US PE exports were heading.

In the first eight months of 2019, US exports are up 44.9% for linear low density polyethylene (LLDPE), 45.7% for high density polyethylene (HDPE) and up 57.6% for low density polyethylene (LDPE), according to data from the ICIS Supply and Demand Database.

Source: ICIS Supply and Demand Database

US producers have won market share in Europe, Africa, southeast Asia and Latin America by competing against rivals for market share. Given that US producers enjoy some of the most favourable PE production economics in the world, US producers have been able to successfully compete in all markets unaffected by additional tariffs.

Source: ICIS Supply and Demand Database

Some sources in Europe were hoping that US production may be cut back, but so far there has been no sign of this, especially at new plants.

“They won’t be cutting back,” said an observer.  “The newer ones they will be running flat out.”

Some sources expected US prices to level off now that margins on naphtha-based Asian were moving into negative territory, but it is not clear if or when this may happen.

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: LyondellBasell's petrochemicals complex in Channelview, US; large polymers capacities have started up in the Gulf Coast, putting pressure on global prices
Source: LyondellBasell

Focus article by Linda Naylor

Additional reporting by Zachary Moore