Two-tier HDPE spot market develops in Europe as US imports dominate

LONDON (ICIS)–A two- and even three-tier market is becoming established in the high density polyethylene (HDPE) market in Europe as US material from new capacities is offered on a widespread basis.

– Buyers stick to regular suppliers

– End-year rebates play a role

Offers from new North American traders began in November, spreading panic as they seemed to offer to every sort of buyer, adopting a scatter gun approach.

This has subsided to an extent, but a very broad range of prices has been quoted.

Low-end levels of €800/tonne delivered – not confirmed but widely quoted – are available for January delivery, according to some sources.

Not all sources trust this number and, in any case, it seems to be available for non-branded material in trader-nominated bags, or neutral bags.

Any converter responsible for food-contact packaging cannot take this material, so is unable to take advantage of such prices, if they indeed exist.

Several buyers insist such a level has only been offered on a €800/tonne CIF (cost, insurance, freight) level, not delivered.

A higher price around the €900/tonne level – with prices above and below – are traded for Europe-based approved grades, and prices towards the mid-€900/tonne level are done for bimodal specific grades.

FOCUS ON CONTRACTS
These spot prices are circulating at a time when many HDPE buyers are focusing on covering contracts to trigger extra discounts based on volume, so spot offers are not uppermost in their minds.

Contractual prices have been relatively uniform, with buyers getting a decrease in line with the €30/tonne drop of the November ethylene contract, as they have been taking volumes for their rebates.

Sources are waiting for the December ethylene contract to settle, to give some direction for December polyethylene (PE) pricing.

Ethylene is long, but naphtha is higher than when the November ethylene contract settled, so those involved in pricing discussions will be using both points of argument, depending on their position.

A new ethylene contract is imminent.

OUTLOOK
2020 is expected to be a difficult year, as production continues to come on stream both in the US and elsewhere.

Supply is expected to outweigh demand, and some buyers are planning on taking more spot than in 2019.

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

Thumbnail image source: Carsten Leuzinger/imageBROKER/Shutterstock

Focus article by Linda Naylor