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European PE hovers around 11-year low, is reversal near?

by Manolya Tufan -
  • 18/05/2020 (03:54)
PE markets have been on a bearish trend since March, which sent prices to more than a-decade low. Players are now questioning whether PE prices will reverse the course or not as May is believed to be the last month of decreases.

PE likely to take a respite from downward spiral in June

May offers were mostly revealed with double-digit decreases as suppliers kept prices from falling by more than the 50% of the ethylene drop. This has been the second month that suppliers avoided reflecting the entire monomer drop on their PE offers. March PE deals were mostly closed with decreases of €50/ton in line with the ethylene drop, meanwhile.

The majority of market participants believe that the PE market has no further room to go down as prices stand at 11-year low. In Italy, spot PE film grades hover at around their lowest levels not seen since 2009 on a weekly average, according to ChemOrbis Price Index.

Players are now discussing if a reversal of the PE trend will be seen in June, supported by the firming energy complex. Spot naphtha prices on CIF NWE basis rose by $75/ton in the past two weeks, according to ChemOrbis Price Wizard. June ethylene expectations call for increases, although spot figures remained mostly unchanged from late April.

LDPE under pressure of tightness

LDPE prices have posted smaller drops compared to LLDPE and HDPE film since the downtrend kicked off in early March. This stemmed from boosted demand for flexible packaging, limited imports and regional producers’ limited allocations.

As can be seen from ChemOrbis Product Snapshot below, LDPE film prices in Italy and Northwest Europe have seen cumulative decreases of €115/ton since early March, while LLDPE and HDPE film prices have posted respective decreases of €155-160/ton and €175/ton during this period.

*Right click the image and open in a new tab to view the full-sized snapshot.

Eyes on impact of Borealis’ LDPE plant closure

Borealis reportedly declared a force majeure on output from its Stenungsund cracker in Sweden after a fire broke out.

Market sources also reported that the company’s 350,000 tons/year LDPE plant at the same site was affected by the cracker shutdown, while other derivative units are running normally.

This may add to the ongoing tightness across the region and push LDPE prices up, players opined.

How will demand react?

Buying appetite for PE grades cooled off at the start of May after buyers replenished stocks in the past couple of months out of expectations that prices hit the bottom. Plus, virus-induced panic buying of food and hygiene products have subsided and consumption is slowly returning to the pre-virus levels.

Converters who are grappling with liquidity issues are not engaging in bulky tonnages despite attractive prices and stable to firmer June expectations. According to them, it will take time for economies to recover from the coronavirus pandemic and the pace of the expected recovery will vary depending on the sector.

A buyer said, “We expect a mainly stable trend for next month as a rebound may not be supported.”

On the other side of the coin, some players expect to see an improvement in demand also for other products that were less preferred during lockdowns. Re-openings of more shops and factories may boost demand after several weeks of inactivity. Plus, they pointed to the fact that some regional suppliers are putting their customers on allocation for May.
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