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Bullish PE expectations cool off for April in Europe

  • 24/03/2017 (04:06)
European PE players are wrapping up their March business with monthly increases ranging between €30-50/ton. However, recently slowing demand from manufacturers, expectations for relatively smaller hikes on April ethylene contracts and slight discounts which have already appeared for LDPE have put a cap on the market outlook for next month.

In Europe, spot naphtha prices recently stood at the lowest levels since more than 3 months, according to the weekly CIF NWE average on ChemOrbis Price Wizard. This was after breaking below the $500/ton threshold in mid-February in line with weakening ICE Brent crude oil futures.

Consequently, spot ethylene prices on an FD NWE basis edged down week over week while they represent only a small gain of €15/ton compared to the beginning of March. In the face of those factors, an increasing number of players in the region started to expect minor increases on the outcome of the new ethylene settlement.

Downstream PE participants opined, “HDPE prices may see rollovers considering the comfortable availability for that product. LDPE and LLDPE may witness small hike attempts from sellers though as supply is rather limited for those products.” In fact, a distributor of a West European producer revised his LDPE price down to Italy following his supplier’s guidelines, while keeping his HDPE offers flat.

A packaging converter highlighted that LLDPE supply is tight due to output problems at some Middle Eastern producers. “There is market talk about €10-30/ton increases on ethylene contracts. We don’t expect to pay any hikes beyond the April ethylene contract as sellers already enjoyed good margins during March. Plus, we are having a hard time reflecting the rising raw material costs onto our end product prices,” the buyer said.

“We could sell half of our usual quota this month as activity has slowed down recently. Players are currently sticking to the sidelines in order to wait for April monomer contracts,” noted a distributor. “Now that expectations for an extended firming to April toned down, buyers may remain sidelined. We mostly expect to see rollovers for the coming month,” another one stated.    

Sellers in Northwest Europe made similar comments, with a distributor in France complaining about weak demand. He said, “Suppliers have not sold good volumes this month and thereby, they may adjust their PE prices down for April.” A trader in the Netherlands confirmed, “We are struggling to conclude deals as demand has strongly slowed down recently amidst expectations for a reversal on the part of converters.”

In addition to the lower upstream chain which compensates for the impact of the cracker turnaround season in Europe, another factor that cast a shadow on the outlook is the possibility that import PE offers may gain competitive power once local PE prices are offered higher for April and more overseas sellers shift their attention to Europe in the midst of softening prices in Turkey and Asia.
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