Price and market trends: Europe PE producer targets April price increase in uncertain market

04 April 2014 09:33 Source:ICIS Chemical Business

Tightness explained by better-than-expected demand plus fewer imports since the duty from GCC countries rose


 PE is used in the agricultural industry and in packaging

Copyright: Rex Features

A major polyethylene (PE) producer is targeting a €40/tonne increase in April, based on tight supply and unsustainable margins, in spite of the €15/tonne drop in the April ethylene contract, a company source said on 31 March.

Other producers have been slow to set out their stalls for April, and the mood is one of caution.

A couple of sellers have said they would like to improve margins by holding on to the ethylene drop in PE prices, while another was heard to be seeking a €20/tonne increase over March prices.

It was not clear whether sellers were prepared to lose business in search of higher prices, and buyers are not convinced they will be paying more.

“Demand is not great,” said the buyer, “and there is nothing in this market at the moment that can justify an increase.”

March demand has been stronger than expected and low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) availability has tightened considerably.

Even high density polyethylene (HDPE) spot prices have firmed on tighter supply - the HDPE sector has been weak for many months.

The current tightness was put down to the better-than-expected demand seen in March but also to fewer imports seen in Europe since the duty from GCC countries rose from 3% to 6.5% on I January 2014.

Spot PE prices rose in the second half of March, as crude oil prices rose briefly on Ukrainian tensions, and buyers came to the market to buy at very attractive prices rolled out by European suppliers.

LDPE net prices are now approaching €1,300/tonne FD (free delivered) NWE (northwest Europe) from as low as €1,230/tonne FD NWE in the first half of the month.

HDPE film and blowmoulding spot prices have increased by €20-30/tonne from below €1,200/tonne at large accounts.

The LLDPE sector is suffering from a certain amount of competition between grades, but LLDPE C4 (butene based) LLDPE prices have also lifted to €1,260-1,270/tonne FD NWE, following talk of business at €1,220/tonne earlier in March.

April PE business will not come under serious discussion until the month is well under way as much pricing only settles at the end of the month.

Polypropylene players await monomer contract for April price direction

Polypropylene (PP) players in Europe are waiting for the April propylene contract to settle to give some direction to April PP pricing, sources said on 24 March.

Supply has tightened, however, and some producers are confident of being able to lift PP prices on the back of the supply/demand situation rather than any potential upward price movement in the propylene sector.

“There is a clear upward trend ongoing,” a producer said, referring to March PP business based on tight propylene availability. However most other producers said the bulk of PP pricing in March was done at a rollover from February.

PP prices have rolled over since January, marking a period of stability not seen in the PP market since May 2009, shortly after the onset of monthly contract pricing in January 2009.

“Ten weeks of unchanged prices, is this a record?” said one large buyer.

Volatility increased in the PP sector as monthly propylene prices were established in the European market.

Tightening PP availability in Europe has been put down to a tight propylene situation, leading 
to cutbacks in production, but also to a series of minor production issues that have left at least one producer tight.

A couple of more serious production issues are now being resolved.

European propylene supply is tight and spot prices have risen above the contract value for the first time in nearly two years. Supply has been constrained on a combination of better-than-expected demand, under-utilisation of crackers, and refinery shutdowns.

April monomer contract price discussions are due to start next week. Many sources anticipate an increase, but players continue to keep a close eye on naphtha movements. Volatility in the naphtha market often drives propylene volatility, and hence PP volatility.

PP imports have also been down in recent months.

March spot homopolymer injection PP prices are solid at €1,250-1,270/tonne FD (free delivered) NWE (northwest Europe).

The current propylene monomer contract stands at €1,130/tonne FD NWE.

PP is used in packaging, the manufacture of household goods and also in the automotive sector.

By Linda Naylor