Europe PE sellers target May hikes as ethylene slips

By Linda Naylor

LONDON (ICIS)–Several polyethylene (PE) sellers in Europe are targeting higher prices in May following a €5/tonne drop in the upstream ethylene contract, but buyers are not convinced, sources said on Thursday.

Some PE producers have set out their stalls for May and have said they are targeting increases of €30-50/tonne on low density polyethylene (LDPE), linear low density polyethylene (LLDPE) and metallocene LLDPE (MLLDPE), but targets for high density polyethylene (HDPE) are lower, at plus €15-30/tonne.

Ethylene settled for May at €1,160/tonne FD (free delivered) NWE (northwest Europe).

Naphtha-based PE producers in Europe complain of poor margins, saying that current PE price levels are not sustainable.

“The average naphtha price has been going up this year versus PE prices that have been decreasing. We all see the same costs,” said one producer.

European ethylene cracker margins based on naphtha feedstock have fallen, while margins based on LPG (liquefied petroleum gas) have risen, according to ICIS margin analysis on Monday.

Average April contract cracker margins are €11/tonne down on March and are at their lowest since December 2013. Naphtha was back down at $923-925/tonne CIF (cost insurance freight) NWE (northwest Europe). On Tuesday 29 April, naphtha closed at €939-941/tonne.

There is no evidence of any significant prebuying at present and no real concern from buyers.

“It’s a very calm time,” said one large buyer. “I think we’ll see more or less what we saw in April.”

April PE prices rolled over in many cases, particularly LDPE and LLDPE, while HDPE prices slipped. The April ethylene contract fell by €15/tonne, so rollover PE pricing meant margin improvement for PE producers in Europe last month.

Holidays throughout Europe mean that reaction from buyers to the proposed increases in May has been slow, but one buyer said it had been informed of only a €10/tonne increase for May PE by its principal supplier.

Another said it had already been offered a rollover from one its suppliers for May.

“Nobody is going to get an increase out of me with a €5/tonne reduction in ethylene,” it said.

“The only area where we have faced any shortage at all is EVA [ethylene-vinyl acetate],” said another buyer. EVA is a thermoplastic whose properties approach those of elastomers. Others agreed with this.

Tightness in the upstream vinyl acetate monomer (VAM) market has been the cause of higher EVA prices, said sources.

May PE pricing discussions are only expected to begin next week, due to holidays, and even then retroactive pricing at many accounts will mean that final May pricing will not be settled for some time yet.

End of April LDPE net prices are languishing around €1,270-1,280/tonne FD (free delivered) NWE; LLDPE C4 (butene based) remains at €1,250-1,260/tonne, while HDPE prices are still talked around €1,210-1,240/tonne but this remained unconfirmed this week.

PE is used is the manufacture of household goods, and widely in the packaging and agricultural sectors.