Europe PE players look to December after ethylene settlement, prices trend down

LONDON (ICIS)–Polyethylene (PE) players in Europe are digesting the news earlier this week that the December ethylene contract price has decreased by €30/tonne, although signs in the market point to a reduction in the settlement, sources said on Friday.

The upstream contract process was not without its drama, as an initial contract done at minus €45/tonne failed to find support and was eventually superseded by another at minus €30/tonne, that was finally established.

This late contract unsettled the PE market and, even at the start of the month, it remained unclear where December pricing discussions would begin.

That prices are trending downward is admitted even by sellers in the market, but it is not yet clear by how much PE will fall in December.

One producer suggested a drop of €15/tonne would be achievable, while another was looking tentatively at a bigger drop than this. A third would be targeting a rollover.

“We see no reason for prices not to roll over,” it said.

The spread between ethylene and PE has been falling steadily in recent months, and producers have lost margin. November demand was disappointing and, while some buyers are still aiming to trigger year-end volume rebates, others had already reached these targets. The level of demand for December was so far unclear.

High crude oil prices, resulting from OPEC’s decision to cut output, are weighing on producers’ margins, and some are already talking of a price hike for January ethylene on the back of higher crude and naphtha.

“In a nutshell, from our point of view, ethylene will be up, [there will be] far fewer [PE] imports, so a combination of these two things will mean higher prices,” said a producer.

Imports were proving difficult to work as the euro remained weak against the dollar, and traders were finding it hard to buy material at workable prices.

European net PE prices remain among the lowest in the world, so not an attractive option for potential sellers.

The above chart compares HDPE blowmoulding spot prices in Europe is USD minus costs and 6.5 duty, and Asian CFR price, during the week ending 25 November.

December PE prices are expected to begin to emerge next week.

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