Europe’s PE markets up for 3rd month on cost pressure, limited supply

PE suppliers approached the market with larger increases than the ethylene’s outcome in line with the expectations. Sellers’ intention to recover their margins brought increases of between €80/ton and €130/ton depending on the grade compared to the €65/ton gain in ethylene settlement.

LD, LL see larger hikes on elusive supply

Both regional and Middle Eastern sources reported relatively limited availability for LDPE and LLDPE grades, attributing this to the lower run rates at some producers. For instance, regional producers run at 75% rates on average. While European prices saw increases above €100/ton for these grades, a Middle-Eastern supplier reported to have issued €100/ton increases on their LDPE and LLDPE offers to Europe.

Adding to the scene has been a lack of competitive US PE offers, which is untypical considering the year-end destocking activities across the board. Besides, import offers are not competitive, also taking the long-lead times into account. Distributors prefer to sell from their stocks, without engaging in fresh imports.

A reduction in stock levels both in the spot and import markets reinforced the firmer stance among sellers. Hence, players think that increases surpassing the ethylene hike may pass on LDPE and LLDPE deals as these products are under a more visible upward pressure.

HDPE deals are likely to be closed with increases matching the ethylene hike, except for HDPE pipe grades due to some production hiccups. Participants are unwilling to pay increases beyond the ethylene hikes for grades other than LDPE and LLDPE.

LDPE moves above €1250 FD Italy after 5 months

According to ChemOrbis Price Index, the weekly average of LDPE film prices in Italy reached above the €1250/ton FD level for the first time since early May this year. LDPE prices witnessed strongest gains in the past 3 months following an extended downtrend. In Italy, spot PE prices rose by 35% for LDPE, 26% for LLDPE C4 film and 19% for HDPE film since late July.



Buyers preserve cautious stance

Manufacturers have been securing their basic needs for quite some time, mirroring slowing consumer spending amid high inflation. Although the number of inquiries increased amid hefty increases for another month, buyers are not in a rush to purchase due to the unsatisfactory demand from their customers.

Some buyers stick to the sidelines as they are waiting to see if sellers will revise their initial offers and postpone purchases to the latter half of October. Needless to say, they did some pre-buying in September and they plan to keep inventories in check in the run up to the year-end holidays.

Overall demand in Europe is expected to remain weak until the end of the year. Therefore, players think that it is challenging for commodity markets to sustain uptrend. The arrival of previously secured import cargoes may also put a cap on further increases.

Projections for November and December hint at a mostly stable trend for the time being as European PE markets are on a delicate balance between concerns over demand on one side and elusive availability and tight producer margins amid a strong upstream chain on the other side.