Europe PE players begin to discuss January, as crude prices slide

LONDON (ICIS)–Pricing discussions for January polyethylene (PE) in Europe have been slow to start, as some regions returned to work only on the 7th, but initial offers are being made and deliberated, as upstream crude oil prices slide after their recent sharp spike.

• Sellers seek margin restitution
• Supply ample
• Market slow to start 

Some producers are talking to their customers about price increases, announced already to the market in December. A couple of ambitious sellers are looking for a €50/tonne increase, to recover margins lost in the fourth quarter.

Buyers are not entirely sympathetic to this argument, but some do accept that current net spot levels are unsustainable, and it is only at this very low-end level that sellers can be confident of hauling prices up.

By December some high density polyethylene (HDPE) spot prices were said to be being done at breathtakingly low levels. These were mainly for US imports from traders that were also new to the European market, and local sellers could not go anywhere near the numbers that were said to be offered.

Most spot low-end PE offers have been below the ethylene contract level of €970/tonne FD (free delivered) NWE (northwest Europe), even for local product, but the fresh offers from new traders were on another plane. Local traders could generally not match these offers, and new ones for January were said to be around $30/tonne higher.

Most sources said these offers were no longer in the market for 2020, and while it was clear by how much, if at all, prices would rise by in January, there was no more talk of lower prices. Even buyers acknowledged that current spot levels were probably at the bottom.

January demand is not an easy month to gauge.

Some buyers will have stocked up perhaps more than they intended to, as they sought to trigger end-year volume rebates, while most will have tried to end the year with low stocks.

Producers’ stocks can realistically be expected to have risen. Volumes were not high in November and December, in spite of the end-year onus scheme some buyers have in place, so some volume build-up is expected to have taken place.

Some cracker and PE production issues may have affected this, with problems in Wesseling, Germany, and Aubette, France, said to have taken place throughout December, with certain grades not as long as they might be.

Low end-year stocks mean that January volumes may be strong, as buyers come back to replenish for the new year.

The recent events in Iraq have also been adding uncertainty to the situation, but there was no sign of any panic buying following the rapid rise of crude oil a few days ago. By Thursday Brent had fallen back to $65/bbl. Clearly this could change at a moment’s notice, but this easing no longer supports higher price ideas in the PE market as it did only a few days ago.

Some players expect January to be stable, and that a new push will be made for February, when converters are fully back in the market, ahead of a traditionally strong March.

Caution is clearly the watchword for converters presently.

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

Focus article by Linda Naylor

Front page image: Bottle caps made of HDPE (high-density polyethylene) segregated according to the colours prepared for recycling. Source: Shutterstock.