Europe MLLDPE February prices rise in spite of oversupply

LONDON (ICIS)–European metallocene linear low density polyethylene (MLLDPE) C6 (hexene based) prices are increasing in February in spite of oversupply that is expected to continue for some time, sources said on Monday.

MLLDPE C6 prices have risen in line with those in the wider polyethylene (PE) prices in February, also in line with the increase in the monthly ethylene contract and short of the targets initially set by several producers earlier in the month, based on decreased spread between monomer and polymer.

The market remains nevertheless weak, according to several sources.

“Metallocene [LLDPE] is one of the weakest PE grades at the moment,” said a producer.

The use of MLLDPE to create stronger films, using less material, a process known in the industry as downgauging, has been increasing in the recent past, and so has supply of such grades.

While in time all the new supply is expected to be absorbed, there is currently ample availability, and this has been apparent in spot pricing in Europe.

In May 2016, Spanish oil and petrochemicals major Repsol started producing MLLDPE in Tarragona and, earlier that year, Total Petrochemicals switched high density polyethylene (HDPE) pipe PE 100 grade to MLLDPE production.

MLLDPE output has also been introduced at other sites, switched from other grades, but producers have been coy about announcing this process officially to the market.

Recent spot MLLDPE prices have gone up, but from very low levels of below €1,200/tonne DDP (delivered duty paid) in some cases.

Price levels from Europe’s major producer – making a product that many buyers are prepared to pay a premium for – have been consistently higher than this, and are currently trading at medium-sized accounts in the high-€1,200s/tonne FD (free delivered) NWE (northwest Europe).

MLLDPE imports into Europe have decreased in recent weeks, according to sources.

Low prices and good demand from other regions have drawn sellers elsewhere, and even though polyethylene (PE) prices in the wider market have risen in February, the market has been rather sluggish, according to many sources.

Lower crude and naphtha prices have led to many buyers expecting at worst a rollover for the upcoming March ethylene contract, and it has been hard for producers to raise PE prices above any increase in the prevailing ethylene contract, resulting in a declining spread between monomer and polymer in recent months.

“In the best case, we are talking a rollover for March ethylene [contract],” said one seller, explaining why some buyers have retreated to the sidelines after strong initial buying this month.

Upcoming new capacity in North America has some more MLLDPE volumes on the way, and Indian production recently on stream has also introduced new MLLDPE volumes, adding to the feeling that supply is ample.

The fact that MLLDPE prices have increased a little in February seems to be because of momentum from the PE market in general, said sources.

MLLDPE is used in packaging and in the agricultural sector.

Pictured above: Plastic sheeting cloches protecting early vegetable crop in a field in Suffolk, UK
Source: General Images/UIG/REX/Shutterstock

Focus article by Linda Naylor