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Bearish run for PE persists in Italy and West Europe

by Manolya Tufan -
  • 09/05/2024 (08:57)
May marked the second consecutive month of PE drops in Italy and West Europe, with initial offers indicating decreases of up to €60/ton as opposed to meagre rollover attempts in some cases. Comfortable availability, unsatisfactory demand and competitive non-EU origins were the main culprits behind the bearish run rather than falling monomer contracts. Participants are now discussing whether recent drops will spur sales amid a holiday-shortened month or not.

Downfall enters 2nd month

After following increases throughout Q1, PE prices shifted direction in early April and deals were closed with €50-80/ton drops despite higher ethylene settlement for April. Markets extended losses into the second month as May kicked off.

Regional suppliers mostly applied decreases varying in size to align with the rest of the market despite rollover attempts in a few cases. Prices on FD Italy basis hit their lowest levels since late January-early February, ChemOrbis data unveiled.


Non-EU PE forms low ends in spot markets

Non-European origins saw more limited drops but continued to form the bottom ends of the spot markets. US PE broke below the €1200/ton FD Italy threshold for some grades. Offers for this origin stood at €1200-1230/ton for LDPE film, €1100-1150/ton for LLDPE C4 film, €1150-1200/ton for HDPE film, €1180-1200/ton for HDPE b/m and inj. and at €1240-1280/ton for mLLDPE C6 film, all on local terms.

A similar panorama was observed in West European markets, with HDPE b/m offers hitting as low as €1150/ton FD level for US material.

Demand unlikely to stage a rebound ahead of summer

Activities at downstream factories were better until March, which were driven by steep resin hikes amid shorter import availability following Red Sea diversions. Buyers avoided purchasing from the spot market last month amid softer May expectations, while they also shunned buying from the import market given longer lead times. Hence, sellers expect an increase in sales volumes this month, considering low stocks at the converter level.

Although buyers wait on the sidelines until more PE offers are announced, some replenishment activity may be seen once more buyers return to guarantee some parcels ahead of the summer period. On the flip side, May will be rich in holidays in West Europe and reduced consumption across many derivative sectors may keep purchases hand-to-mouth, as was the case during the same period of last year despite the seasonality.

Converters will produce for three weeks instead of four this month, as a seller put it.
A player opined, “Sales should be better this month. Sellers need to destock the current inventories after slow April sales, while buyers also need to buy. Plus, buyers may be more cautious with purchases heading towards the summer season.”

Where do prices head now?

PE markets may see gradual softening during the month under the pressure of weak demand. Buyers expect to receive further discounts during negotiations, which adds to their waiting stance. Even end buyers expect reductions in prices. One of them said, “We would like to buy better than last month if we can get additional drops.”

The June outlook remains foggy as some players believe that there may be limited to no room for decreases. Others expect to see a stable to softer trend for next month, with demand setting the tone of the future trend. Should crude oil prices fail to erase their earlier losses, the next monomer settlement may also be lower.

It is worth noting that any unforeseen disruption including potential escalation in the ME conflict or hurricanes in the US, spanning from June 1 to November 30 this year, could also affect the trajectory.
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