US PE offers not tempting all European buyers in spite of knockdown prices

Author: Linda Naylor

2019/11/22

LONDON (ICIS)--Polyethylene (PE) imports into Europe from the US are not always tempting buyers in spite of the very low prices.

- US HDPE at knockdown prices

- Buyers target end-year discounts

- Global GDP forecasts down 

The grades most affected by US imports are high density polyethylene (HDPE) and linear low density polyethylene (LLDPE), with levels well below €900/tonne FD (free delivered) NWE (northwest Europe) for some HDPE grades in particular.

Some sources even quoted prices as low as €800/tonne, but this has not been confirmed in the wider market.

Spot prices had been trading above this level in previous weeks.

The spot offers that have flooded the market in the past month are mainly, but not exclusively, from traders with material from US producers who have no assets in Europe, and they are for commodity grades.

They are coming into Europe at a time when most converters are aiming for two contradictory things: to end the year with as little stock as possible, and to buy enough from their regular suppliers so that they trigger end-year rebates for pre-agreed volumes.

This means that they get extra rebates on volumes bought throughout the year, so are not to be missed.

US material has been coming into Europe in increasing volume as production has grown, but it is now becoming increasingly visible.

The chart below shows the rise in HDPE import volumes from the US to Europe, while also showing the drop in volumes to China, mainly because of the heavy import duties on US PE into China.

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The particular situation that exists in Europe – with buyers sticking to regular sellers to get their discounts – is typical of end-year PE activity but, with 2020 discussions under way, things could change for next year as more production comes on stream and US sellers aim to gain more market share.

Buyers are expecting better conditions for 2020, and this is understandable with new PE capacity coming on stream not only in the US, but also in Russia, Malaysia, Oman, and China.

With new OECD growth estimates reduced globally, new global PE capacity on stream, and PE consumption linked to GDP, 2020 is expected to be a tough year for sellers.

In spite of this, and all the new capacity available, not all buyers are planning to change all their PE buying to spot.

“I’ll be buying more spot, for sure, but I can’t afford to have no contracts,” said one buyer, still mindful of 2015, when production problems led to shortages and massive price spikes.

It was not the price spikes that disturbed buyers most, however, but the lack of supply that led to lines being closed.

2020 discussions are ongoing and likely to last for some weeks.

“It’s a buyer's market,” said another buyer.

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

Thumbnail image source: Paul Brown/Shutterstock

Focus article by Linda Naylor