Europe PE market on hold waiting for ethylene to settle

26 March 2014 12:12 Source:ICIS News

Focus article by Linda Naylor

LONDON (ICIS)--Polyethylene (PE) activity in Europe is slow as players wait for the outcome of ethylene contract discussions for April, sources said on Wednesday.

“PE has stopped because everybody is sold out,” said one distributor. “There is no indication of price out there and a big suspense waiting for monomer.”

PE prices have been tracking ethylene contract prices for some while, but while the April ethylene contract will give direction to PE pricing, some sources expected the supply/demand balance of the market to have more of an impact on pricing than upstream costs.

Some PE grades have tightened considerably in March, and several producers have closed order books on both low density polyethylene (LDPE) and linear low density polyethylene (LLDPE).

Expectations for the April ethylene contract are for a small decrease.

“Customers are going to apply the same logic to PE if ethylene falls,” said one trader.

“They’ll want lower prices if ethylene falls,” said another.

March PE pricing is not yet fully clear, as many large accounts settle the month retroactively. Some sellers are attempting to stem the downward tide in March, even though the March ethylene contract fell by €20/tonne, leading to a similar price decrease in much March PE business done earlier in the month.

In contrast to monthly prices, spot PE prices have risen in March, even in the high density polyethylene (HDPE) market where prices have been around €1,200/tonne FD (free delivered) NWE (northwest Europe) on a net basis for some while.

It was the low spot prices offered in early March that some sources said led to strong buying from the PE sector.

LDPE was trading at €1,230/tonne FD NWE at the beginning of March, a number that many buyers took advantage of as the potential low point of the market, particularly as the ethylene contract was at €1,180/tonne FD NWE.

On March 26 spot LDPE prices were quoted at €1,290-1,300/tonne, albeit for limited business.

C4 (butene based) LLDPE prices have also rallied from a low around €1,220/tonne FD NWE in early March, to €1,260-1,270/tonne and even sometimes higher, on Wednesday.

HDPE spot prices are no longer trading below €1,200/tonne, with modest increases leaving limited business at €1,210-1,220/tonne FD NWE.

Inventories with both buyers and sellers are thought to be low, and some players expect this to lead to a relatively strong April.

“Even if April is a short month because of Easter, buyers will have to come to the market as they haven’t been buying for the past 14 days,” said one of the traders.

The mood remains cautious and contradictory, however, and buyers and sellers take care to control stocks along the chain.

By Linda Naylor