Europe PE prices languish as crude prices reach highest point since 2014

LONDON (ICIS)–Polyethylene (PE) prices are languishing at low levels in global terms, as crude prices reach their highest point since November 2014.

May PE prices for contracted volumes are stable to slightly higher, and but low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) C4 (butene based) LLDPE spot prices have been low and static for several weeks, while there has been some firming in some high density polyethylene (HDPE) markets.

Sources have been saying for several months now that European prices need to rise, or Asian ones fall, for the balance to be redressed, but there has been little change, and the gap between PE and ethylene has been shrinking.

This reduction in the spread between monomer and polymer has not been too serious for integrated PE producers up to this point, as cracker margins have been strong. But the sharp rise in crude oil prices, coupled with the recent weakening of the euro against the dollar, has meant a severe drop in cracker margins.

Naphtha-based cracker margins were at their lowest point in 2018 last week, and continued strength upstream will probably have further impact this week.

Against this backdrop, producers are beginning to show some concern, but so far there has been little sign of cracker cutbacks.

One HDPE producer said it had cut non-contracted production as net spot prices were barely at monomer contract levels, but on the whole, there was not much evidence of production cutbacks.

PE buying sources have been aware of ample supply, particularly in LDPE and LLDPE markets, and have often questioned whether production will be cut back.

Others were wondering if supply was as long as many seem to think, however.

“There are very few imports,” said a producer, “and we haven’t seen much American product yet.”

Imports were expected to remain reduced, with the euro weak, and spot prices so low in Europe, and with Europe a net importer of some PE grades, this could affect availability in the coming weeks.

C4 LLDPE is Europe’s largest imported PE grade, and some sources were no longer sure there was that much material around.

One trader said fresh offers were far too high to work into Europe, and that current stocks were depleting fast.

With crude oil at its highest level since 2014, sources were wondering how the situation in Europe would pan out.

Some opined that cutting back production was the only way forward.

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

Focus article by Linda Naylor

Picturse source: Dinendra Haria/REX/Shutterstock