Sector News

Europe PE buyers face large hikes in uncertain market

July 9, 2020
Chemical Value Chain

Polyethylene (PE) buyers face significant increases in the early stages of July discussions, although retroactive business means that final numbers will not be settled for some weeks.

The high level of uncertainty, particularly for August, has led to a wide range of views on how the market is faring.

Packaging demand has been very strong in the past three months but there are doubts as to how long this can be sustained.

The July ethylene contract rose by €84/tonne, and many buyers said they have been offered increases of €60-85/tonne, depending on the grade, the origin of material and the producer concerned.

A couple of producers were separately said to be asking for plus €100/tonne, although buyers are eyeing this target with scepticism.

Some early settlers have confirmed that they have accepted plus €80/tonne for the month, depending on the grade, size of account and seller.

There are pockets of tightness of some grades – mainly low density polyethylene (LDPE) and some high density polyethylene (HDPE) grades.

LDPE is balanced-to-tight following several unplanned production issues, and HDPE is seeing lower import volumes on some US production maintenance, and better netbacks to other regions. Europe is a net importer of HDPE.

Exports have also supported demand in recent weeks, according to several sellers.

Spot prices in July have generally been higher for most grades, but it is in the spot market where demand is mixed and not as buoyant as in the contracted market.

The month is turning out to be difficult for buyers, some of whom expected to pay only half of the €84/tonne ethylene contract increase, but this is not yet on offer. Some buyers are holding out hope that lower offers will be available in the second half of the month.

If naphtha remains high, reflecting high costs for European producers, it is unlikely that price ideas will go down, unless demand slumps – and while this is a concern for August, July is looking steady.

Sources are also looking to Asia, where prices are also firming, meaning that a new influx of imports in the short term is unlikely.

PE discussions are notoriously protracted, with the practice of end-month settlements still rife at many large accounts, so an imminent conclusion is not expected.

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

By: Linda Naylor

Source: ICIS

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