The upstream contract settled last week at a €15/tonne decrease, with PE sellers already making their intentions clear before this and separately discussing rollover targets.
Targets from buyers have been at a decrease so far, with many trying to get the full extent of the ethylene drop.
Both PE and PP players had been hesitant leading up to the settlements, with uncertainty over upstream pricing direction slowing trading activity.
There is expected to be an uptick in action on the spot market, although demand may falter later in the month as holiday season kicks in.
Supply and demand will also impact the July contract talks, and while orders for July look healthy so far, there will be some softening of levels in parts of Europe in July and August.
Supply for PE overall in balanced, with both the low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) markets well supplied.
This is despite a reduction in imports, with lower European prices keeping overseas material away.
“The American invasion is not ready yet,” said one PE trader.
The impact of the new capacity in the US has been a slight anti-climax so far for European players, with the tsunami of product yet to materialise.
Players saw product in May from US sellers, but then this material ‘vanished’, which is expected to be because of the higher netbacks domestically for US producers.
While the lack of imports has helped to balanced LDPE and LLDPE supply, the balance has tipped for high density polyethylene (HDPE).
Lower imports, combined with local production problems have tightened the HDPE market, for the majority of grades.
Total declared force majeure at its HDPE Gonfreville plant on 22 June, and INEOS was also experiencing issues at Lavera following problems with its cracker. Neither outages have been officially confirmed by the producers.
Some HDPE grades are also being impacted by local producers lowering output, and increasing the production of HDPE pipe.
The HDPE pipe industry remains strong, with better netbacks for sellers in comparison to other grades.
Demand in general is healthy, with the traditional uptick amid higher demand from the food and beverage sector over the summer months.
June retroactive contracts finished last week, with prices settling either in line with the monthly monomer hike or above.
PE is used in packaging, the manufacture of household goods, and also in the agricultural industry.
PP is used for packaging, ropes, carpets, plastic parts, loudspeakers and automotive parts.
Focus article by Katherine Sale
Mandatory Credit: Photo by REX Shutterstock (3927721a)
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