European PE, PP buyers face upward pressure on eve of new capacity start-ups

Linda Naylor

09-Aug-2017

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LONDON (ICIS)–Polyethylene (PE) and polypropylene (PP) buyers in Europe are facing some upward pricing pressure even as new PE capacity comes on stream globally, sources said on Wednesday.

Not all August polyolefin sellers are looking for higher prices, but most buyers expect some upward pressure in September as ethylene and propylene remain unexpectedly firm.

Meanwhile, naphtha is also exerting pressure on producers’ margins.

Last week’s unplanned outage at Shell’s Pernis refinery in the Netherlands led to the company declaring force majeure on both ethylene and propylene, tightening monomers even further, and also impacting polymers.

“PP is extremely tight in our system and we’re not certain we’ll get all the C3 [propylene] we will need,” said a PP producer.

Much August PE and PP business has already been done at a rollover, fully confirmed, but many players – buyers and sellers alike – expect prices to be under upward pressure in September.

There also remains some upward pressure in August from some buyers in low density polyethylene (LDPE) in particular, some buyers admitted.

“I will probably have to pay €20/tonne [more] for low density in August,” said a large buyer.

Some PP buyers were also under upward pressure, but much business had been done early in the month, as buyers and sellers settled before leaving for holiday.

July and August buying had been stronger than expected, and some put this down to pre-buying.

European prices are low in global terms and traders have had difficulty getting hold of imports to work.

The recent strengthening of the euro against the US dollar has helped, although rising prices in Asia are still posing competition for European buyers.

Europe is a net importer of some PE grades – notably C4 (butane-based) linear low density polyethylene (LLDPE) and high density PE (HDPE) grades, as well as some PP – and some buyers stressed that prices need to be higher to attract imports that are necessary for the smooth running of the markets.

While upward pressure is widely talked for September, some sources are already asking how long any upward pricing trend can last, with new capacities coming on stream, particularly in North America, India and China.

Most of the new North American capacity due on stream is ethane-based PE, with only China bringing on significant volumes of PP.

Recent/upcoming North America new PE, PP plants

Company

Capacity ‘000 tonnes

Grades

Location

Start-up

Braskem Idesa

1.05m tonnnes

HDPE

Veracruz state, Mexico

Started 2016

Sasol/INEOS

470,000 tonnes

HDPE

La Porte, Texas, US

Q4 2017

NOVA Chemical

454,000 tonnes

LLDPE

Joffre, Alberta, Canada

Started 2016

Braskem

not specified

UHMWPE

La Porte, Texas, US

Started 2016

ExxonMobil

1.3m tonnes

PE (premium)

Mont Belvieu, Texas, US

End 2017

Chevron Phillips

1.0m tonnes

HDPE, LLDPE, other

Sweeny, Texas, US

H2 2017

Dow Chemical

750,000 tonnes

PE (high-value), LDPE

Freeport, Texas, US

Mid-2017

Sasol

470,000

LLDPE

Lake Charles, Louisiana, US

2018

Sasol

420,000

LDPE

Lake Charles, Louisiana, US

2019

Formosa Plastics

567,000 tonnes

LDPE

Point Comfort, Texas, US

2018

Formosa Plastics

525,000 tonnes

HDPE

Point Comfort, Texas, US

2018


India also has a significant amount of PE coming on stream, and both Indian and North American volumes are destined for export, so buyers can reasonably expect volumes to be moving by the end of 2017
or early 2018, several sources said.

Recent/upcoming India new PE, PP plants

Company

Capacity ‘000 tonnes

Grades

Location

OpAl

340

HDPE

Jamnagar

OpAl

720

LLDPE/HDPE swing

Jamnagar

OpAl

340

PP

Jamnagar

Reliance

550

LLDPE/HDPE swing

Dahej

Reliance

400

LDPE

Dahej

PE and PP buyers in Europe are expecting all this new capacity to have some effect in the coming months, if it is only initially to displace volumes that might have left Europe.

However, sellers are fairly relaxed for the moment.

PE and PP are used in packaging and in the manufacture of household goods. PP is also used in the automotive sector and PE in the agricultural industry.

Pictured: PE ‘polytunnerls’ (foreground) in Turkey’s city of Antalya
Source: WestEnd61/REX/Shutterstock

Focus article by Linda Naylor

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