Europe spot PE prices up as monthly prices slip

Focus story by Linda Naylor

LONDON (ICIS)–European polyethylene (PE) players are seeing an upturn in spot prices in August, even as monthly prices slip, and producers are witnessing strong demand in spite of the holiday season, sources said on Monday.

Not all spot prices have moved up but offers are higher and the very low levels in the C4 (butene based) linear low density polyethylene (LLDPE) market in recent weeks have continued to creep up.

Bottom-end prices are now around the €1,130/tonne FD (free delivered) NWE (northwest Europe) mark, from a low of €1,100/tonne and even below, according to some sources.

“Prices are up at the lower end of spot business,” said a producer, citing a modest but clear increase in the low density polyethylene (LDPE) market.

LDPE is less affected by imports than many other PE grades, and a couple of producers said they were surprised by the strong level of demand in this sector in August.

“We have seen three consecutive months where demand was tempered by speculative elements,” said the producer. “There is now some replenishment and they [converters] are now rebuilding stock.”

“We have closed order books on LDPE,” said another producer. “Demand is very good…and spot prices are higher. August for sure will be the bottom.”

In the LLDPE and HDPE sectors, sources were not convinced that August would be the bottom, as a residue of imports would have to be absorbed.

“I can’t see much change for September,” said a large buyer. “The fundamentals are not really changing.”

The more buoyant mood created by higher PE spot prices was countered by lower prices in the upstream crude and naphtha markets, and also a blip in the upward trend that was seen in Asia in July, and many players were cautious.

In contrast to higher spot prices, monthly levels were moving down, but this was a phenomenon most converters had been waiting for for many months as the spread between ethylene and PE had been growing, leading to harsher terms for most European converters in 2016.

Most converters welcomed the possibility of reducing the strong spread that had emerged throughout 2015, when supply became very tight. The spread has doubled since the end of 2014.

Many buyers were now leaving for summer holidays, and were prepared to wait until they got back in the last week of August to see how prices and supply would pan out.