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European PP, PE players brace for another round of 3-digit hikes in Feb

by Manolya Tufan -
  • 25/01/2021 (04:01)
In Europe, participants expect to see another round of supply-driven increases as February approaches. PE suppliers closed their order books before the month ended owing to supply limitations. Meanwhile, PP supplies remained short amid a lack of imports from mainstream suppliers and export activities of regional suppliers.

Jan deals closed with hikes of up to €200

Regional suppliers achieved remarkable hikes on their PP and PE deals for January, mainly supported by supply limitations and robust demand for food and pharmaceutical products amid the pandemic. Increases well above the monthly monomer hikes were absorbed, with transactions standing €150-200/ton above December 2020 levels.

Prices hit fresh highs, LD in Italy regains premium over global markets

According to the weekly average data on ChemOrbis Price Index, spot LDPE prices hit their highest levels since October 2017 in Italy and February 2018 in Northwest Europe following January hikes.

Italy’s LDPE market had started to trade at a narrower premium over other markets including Turkey, Egypt, China and Southeast Asia since around September 2020 and even moved below these markets from autumn onwards. This was because European PE markets failed to catch up with the gains in global markets. Meanwhile, LDPE prices in Italy regained their premium over these markets as of early January.

Under normal circumstances, Italy carries a premium over other markets. Import LDPE prices in the abovementioned regions are on CIF terms, not including any customs clearance and inland transportation costs. Meanwhile, Italy’s local LDPE prices are for prompt cargoes including all duties if applicable and delivery costs to buyers’ plants.

According to the weekly average data on ChemOrbis Price Index, the USD equivalence of spot LDPE in Italy currently stands $195/ton above China and $110/ton above Southeast Asia. Italy’s premium over Egypt rose to around $90/ton, while LDPE prices in Italy carry a premium of $45/ton over LDPE prices in Turkey. Customs duties on import LDPE offers are excluded to be able to make a rough comparison.

Spot homo-PP and PPBC inj. prices in Italy and Northwest Europe also stand at their highest levels not seen since June 2019, ChemOrbis data showed.

Feb expectations call for further hikes

Early indicators showed that polyolefin markets are set to see another month of noteworthy hikes amid a supply-demand imbalance that may last for a while due to the lack of imports, as well as strong upstream costs.

February monomer contracts are expected to settle with hikes due to the fact that spot prices stand above January contract levels of €860/ton for ethylene and €800/ton for propylene. The premium spot monomer prices carry over the contract levels dominates the monthly contract negotiations. Spot ethylene prices have leveled off following cracker restarts, while propylene prices continue to move up on the back of tightness.

This and strong upstream naphtha prices, which hit 1-year high, are likely to pave the way for monthly hikes in monomer settlements, although the size of hikes remains under discussion.

Players mostly expect hikes of up to €100/ton for propylene and €50/ton for ethylene. Meanwhile, a market participant shared hike expectations of €65-80/ton for both ethylene and propylene.

Suppliers aim to issue larger hikes than C2, C3 again

PP and PE suppliers aim to issue larger increases than possible monomer hikes in February, supported by supply shortages and healthy demand. Buyers were looking to do some pre-buying amid firmer voices for February, while they were not able to find much availability in the spot market.

Suppliers were either sold out or closed their order books earlier than usual to be able to cover requirements next month amid ongoing supply issues. Distributors reported, “No imports are making their way to Europe in the short term. Spot availability is short, which forced suppliers to stop sales earlier than usual. Our stocks are not sufficient to meet higher requirements.”

Players see no ease in import supply levels during February amid shipment issues.

Confirming this, a trader selling US material reported that fresh cargoes may not arrive before April. The majority of players concur on the fact that PP and PE markets will rise for the 4th straight month in February. Expectations call for hikes of up to €100/ton for both PP and PE. However, some sellers predicted smaller hikes than €100/ton for PE, pointing to moderate demand in some sectors.
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