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European players question if bottom is near for PE

by Manolya Tufan - mtufan@chemorbis.com
  • 17/07/2019 (10:35)
In Europe, players’ focus has already shifted towards August after July PE deals were mostly agreed with declines in line with the ethylene drop. They discuss if prices are nearing the bottom following sharp PE drops or not amid opposite pressures from stronger crude and naphtha prices and weak fundamentals.

July witnesses larger PE drops

The decreasing trend in the PE market gained steam as costs tumbled in July. July PE deals have been closed with mostly €70-80 drops while stronger drops of €100/ton were only reported in a few cases. These were beyond monthly June decreases.

HDPE film slumped to 2-year low across Europe

According to ChemOrbis Price Index, hefty July drops pushed some HDPE grades to multi-year low levels on average. HDPE prices in Italy hit their lowest levels since July 2017 for film, February 2015 for b/m and February 2019 for injection grades. In Northwest Europe, HDPE prices retreated to their lowest levels last seen in July-August 2017 for film, b/m and injection grades.

According to the average data of ChemOrbis Price Index, LDPE and LLDPE prices both in Italy and Northwest Europe hit their lowest levels since late February this year.

Spot LDPE, LLDPE trade at or below July ethylene contract level

Spot LDPE and LLDPE prices currently stand at or below the July ethylene contract level .

Local market favored over imports

Low prices inside Europe lured some buyers back to the local market to replenish their stocks, although many converters’ leave for holidays is imminent and players are mostly unwilling to engage in long distance material. Therefore, buying appetite for imports remains unstirred.

However, a buyer remarked, “Our poor end sales do not allow us to build large stocks, though. Therefore, we source on a hand to mouth basis.”

Spot C2 is back to late Feb levels

Long ethylene supplies amid healthy flow of imports and weak downstream demand have pushed prices to their lowest levels since late February 2019 recently. Spot ethylene prices posted cumulative drops of around €60/ton on average over the course of July to be quoted at around €850/ton FD NWE, according to ChemOrbis Price Wizard.

The rumor has it that plunging spot ethylene prices might be counterbalanced by rising crude and naphtha prices. Rising energy markets may keep the extent of expected ethylene drops in check, argued a player.

Early Aug PE expectations emerge stable to softer

Spot PE prices at multi-year lows coupled with higher energy costs triggered expectations of stabilization for the upcoming month but players are still not excluding the possibility of a slight softening considering weak demand and comfortable supplies.

It remains to be seen if PE prices will find support from the rising energy costs to stabilize or continue to move south amid the absence of market players. The fact that demand will not be sturdy during summer holidays as well as ample PE supplies may continue to pressure the market during August.

Increases likely to be delayed to September

A reversal in the market trend for August is excluded for the time being as there are no strong bullish factors to pull prices out of the trough. The more likely scenario is that September might witness hike attempts as demand may recover after buyers’ return from the holidays also considering the planned cracker turnarounds.

A distributor commented, “Buyers are purchasing more material with delivery in September. This is why demand is better than June. Sentiment is bullish for September.”
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