Europe PE sellers request hikes for extra volume on strong demand

LONDON (ICIS)–Polyethylene (PE) demand has been stronger then expected for producers in August and some are now approaching the market with hikes for extra volumes, sources said on Friday.

“For new orders we are asking for a 20-30 [€/tonne] premium,” said one producer that had sold its forecast for the month of August.

“Demand looks very good and the order volume has increased,” said another seller, adding, “I’m limiting sales volumes.”

Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) in particular were strong for contracted volumes in August, while traders noted a calmer situation.

Some spot prices have risen this month, but from very low levels, and demand for the trade sector has been fairly lacklustre. Traders have been unable to cover fresh sales at old prices, however, and several can only offer at higher levels so as not to lose money.

As early as the first week in August another producer had already closed its LDPE order book.

Ethylene supply was tight, leading to some producers shifting production from PE grades where margins were less strong to those where margins were better.

There was very little spot ethylene available, and while spot price ideas were higher, the lack of trade made it difficult to peg levels. The August contract settled down by €20/tonne, at €925/tonne FD (free delivered) NWE (northwest Europe).

The supply/demand situation was tempered by upstream costs, which have dropped in August, leading to some expectations of a reduction in the September monomer contract.

Most sources said it was too early to speculate on September, however tempting it might be.

Crude and naphtha have rallied this week, but the average feedstock prices were said to be lower than when the August contract settled. This week has seen some firming of upstream products but crude and naphtha have been notoriously volatile.

One PE sector where demand was disappointing for monthly sellers remained the high density polyethylene (HDPE) pipe sector, and there were signs that this was being cut back and production shifting to other HDPE grades, such as blowmoulding.

Most sources were on holiday this week, but some buyers were clearly making precautionary purchases to ensure they had enough material after a period of destocking that had lasted two to three months.

“We have a big forecast for September,” said a large buyer, “I will be taking more stock in August.”

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

Focus article by Linda Naylor

Image of polyethylene film: Tim Graham/robertharding/REX/Shutterstock