European producers trying to manage ample supply

PP, PVC and PE prices in Europe have been on a downward trend for some time as they have felt pressure from falling upstream costs and persistently poor demand amid deepening economic woes across the continent. Supply is ample in the region as a result, further weighing down on sellers. Accordingly, European producers have been looking for ways to manage their rising stock pressure.

European producers are believed to be scaling back their production. Although it has only been Borealis that officially announced lowering operating rates at its PP and PE plants to 73-75% from 80-85% in May, other producers are also heard to be at reduced rates. An official distributor of a West European PVC producer in Italy said, “We have less availability this month as our supplier has reduced its operating rates due to lethargic demand across Europe.”

Regional producers have also kept an eye on export markets in order to relieve their accumulating stock pressure. An influx of European PP, PVC and PE materials has found its way to the nearby markets including Turkey and Egypt at relatively attractive prices. The weakening stance of the euro against the US dollar has been to the advantage of European sellers as they can move their cargoes to these outlets more easily.

This has been particularly obvious in Turkey, where European cargoes have been widely offered at lower levels on a weekly basis. Their exemption from customs duty has also added to their competitiveness in Turkey’s import market against other regular Middle Eastern and Asian origins.

(Source: ChemOrbis Price Wizard)

In the PE market, the Turkish market has seen offers from Europe on CFR, cash basis standing €70-110/ton below the lowest local spot prices in Italy. As can be seen from the graph above, Italy’s local spot prices have maintained their premium over Turkey’s overall import prices including customs duties if applicable.

Likewise, plentiful European PP cargoes have been seen streaming into Turkey at lower levels. Although the import homo PP offers made to Turkey on CFR basis and the low end of the local spot prices in Italy appear to be coming closer recently, the difference between the two regions remains wide on average.

In the PVC market, the difference between two regions is the widest with import European PVC offers made to Turkey this week standing €70-90/ton below the local k67 offers reported in Italy’s spot PVC market.