Corrected: Europe PE, PP buyers facing hikes as sources prepare for Fakuma trade fair

09 October 2017 14:41 Source:ICIS News

(Correction: In the ICIS news story headlined "Europe PE, PP buyers facing hikes as sources prepare for Fakuma trade fair", dated 9 October 2017, please note in the second table that OpAl's PE/PP plants are located in Dahej, while Reliance's  units are located in Jamnagar, rather than the other way round as originally stated. A corrected story follows)

LONDON (ICIS)--Polyethylene (PE) and polypropylene (PP) buyers in Europe are facing higher prices for October, as new capacity comes on stream in North America, and many prepare to head to the 25th Fakuma, the industry event in Friedrichsafen, Germany, due to begin on 17 October.

Both PE and PP sellers were targeting margin improvement again for October, following the €30/tonne increase in both ethylene and propylene contracts for the month, but it was not yet clear whether they would succeed.

Most PE and PP buyers are expecting to have to pay hikes in line with the upstream monomer increases, but there is little evidence of supply shortages in either PE or PP, they said.

“There is no shortage of anything,” said another, “but they will be able to get the monomer [increase of €30/tonne].”

In spite of many PE buyers not believing in shortages, most were considering paying hikes, they said.

This was put down to concerns over supply as US production remained reduced following severe weather conditions, and some sellers were informing customers of potential shortages as they supported sister companies in the US.

In spite of this, however, there were no indications of lines under threat of closing.

Some spot prices had risen, as some sellers insisted on converters paying for their approved material, but on the whole, the rise in spot prices was relatively moderate, and while buying was beginning to pick up, there was no strong rush to buy.

PP buyers were under the same pressure, if not stronger, as imminent new capacities coming out of North America in particular, was mainly for PE, not PP, and demand in Europe was stronger than for PE.

Even in PP, however, there were no reports of product shortages, and discussions were still under way but producers seemed confident in a balanced market.

In the longer term, PE buyers should be able to gain access to ethane-based PE, from the US, while PP buyers did not expect to have the same access to an improved supply of imports.

Some new capacities in North America were starting up in October, but current production remains hampered by recent severe weather, and some free on board (FOB) prices out of the US Gulf are higher than delivered prices in Europe for the time being.

The following chart compares CFR (cost and freight) Asian HDPE blowmoulding, FOB US Gulf HDPE blowmoulding, and FD (free delivered) NWE (northwest Europe) spot blowmoulding numbers, converted from euros to $/tonne. European numbers include duties and delivery paid by the seller to the converter.

Recent/upcoming North America new PE, PP plants

 

Company

Capacity
‘000 tonnes

Grades

Location

Start-up

Braskem
Idesa

1.05m

HDPE

Veracruz state,
Mexico

Started 2016

Sasol/
INEOS

470,000

HDPE

La Porte, 
Texas, US

Q4 2017

NOVA 
Chemical

454,000

LLDPE

Joffre, Alberta, 
Canada

Started 2016

Braskem

not 
specified

UHMWPE

La Porte, 
Texas, US

Started 2016

ExxonMobil

1.3m

PE
(premium)

Mont Belvieu, 
Texas, US

End 2017

Chevron 
Phillips

1m

HDPE, 
LLDPE, 
other

Sweeny, 
Texas, US

Started Oct 2017

Dow 
Chemical

750,000

PE 
(high-value), 
LDPE

Freeport, 
Texas, US

Started Oct 2017

Sasol

470,000

LLDPE

Lake Charles, 
Louisiana, US

2018

Sasol

420,000

LDPE

Lake Charles, 
Louisiana, US

2019

Formosa 
Plastics

567,000

LDPE

Point Comfort, 
Texas, US

2018

Formosa 
Plastics

525,000

HDPE

Point Comfort, 
Texas, US

2018


Recent/upcoming India new PE, PP plants

Company

Capacity ‘000 tonnes

Grades

Location

OpAl

340

HDPE

Dahej

OpAl

720

LLDPE/HDPE swing

Dahej

OpAl

340

PP

Dahej

Reliance

550

LLDPE/HDPE swing

Jamnagar

Reliance

400

LDPE

Jamnagar


The Asian market has been strong, pulling volumes eastwards from the Middle East, and several players in Europe – both producers and converters – had been helping out sister companies in the US with supplementary volumes during the recent hurricane period.

Sources were waiting to see how Asian demand fared after the recent week-long holiday in China.

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

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

In spite of the new capacities, several large European PE buyers said they did not expect to have access to new imports before the first quarter 2018.

For October, there was little argument over the direction of pricing for PE and PP, but many buyers were becoming cautious, all the while keeping an eye on events globally.

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

Fakuma runs from 17 - 21 October.

Focus article by Linda Naylor

By Linda Naylor