Europe PE buyers and sellers square up for July discussions

Focus article by Linda Naylor

LONDON (ICIS)–Polyethylene (PE) players in Europe are preparing for July pricing discussions that are likely to be protracted and difficult, sources agreed on Monday.

The increase of the July ethylene contract price at a €50/tonne increase has led to sellers targeting hikes in excess of this number, generally between €60-80/tonne.

“These prices are too high,” said one buyer. “We’re going to struggle to get increases through because nobody expects prices to stick.”

Availability of some PE grades tightened in June, particularly low density polyethylene (LDPE).

Some PE sellers said they were surprised by the level of demand for LDPE in July, while some sources put it down to a possible delayed start-up of SABIC’s 400,000 tonne/year LDPE plant at Wilton in the UK.

While SABIC has declined to comment on the status of the plant, several large buyers throughout Europe said they have not received  volumes from it. Sources therefore assumed the plant is not back up following its planned maintenance that is said to have begun in May, and was due to end on 22 June.

Most large buyers have been able to secure volumes elsewhere, they said, and some had made light provision for such an eventuality, but if the problem persists, they said July could be a difficult month for them.

It was in the LDPE segment that buyers feared the possibility of paying stronger increases than  €50/tonne for July.

On Monday the status of the plant was still not clear.

In spite of LDPE tightness, mainly in the 0.3 melt flow LDPE market, some spot sellers were finding it difficult to raise prices beyond the mid-€1,300s/tonne FD (free delivered) NWE (northwest Europe). By Monday, higher numbers were heard in the UK, where the impact of Wilton was more severe than elsewhere

In other PE segments, there was less tension, but sellers were managing to eliminate low prices from the market, several sources said.

High density polyethylene (HDPE) net prices for imports were no longer trading in the low-€1,200s/tonne DDP (delivered duty paid), and blowmoulding net prices have risen to €1,260/tonne, while spot film prices have surged to €1,270-1,290/tonne, supported by a shortage in the medium density polyethylene (MDPE) segment.

Imports in the HDPE market have been playing an increasingly important role, and the increase in duty imposed on PE from the major GCC importing region, from 3-6.5%, has had an impact on availability in Europe.

Sources suggested that the current hike in European PE pricing could begin to attract an increased volume of imports again, as netbacks become more attractive to Middle Eastern sellers.

Much of the upward movement seen in the PE market at present is from the increase in the upstream ethylene contract price, which in turn is affected by naphtha and crude oil pricing. These prices have eased recently, and some PE buyers expect this to have a softening effect on PE prices into the summer, as holidays also take hold.

On Monday, naphtha was assessed at $947-949/tonne CIF (cost insurance freight) NWE. It traded as high as $975/tonne CIF NWE as recently as the week ending 27 June.

Many July PE discussions will only conclude at the end of the month, as retroactive pricing is still a feature in this market in many regions in Europe, but most buyers acknowledge they will have to pay higher prices.

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