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HDPE fails to track firmer trend of LD, LLDPE in Europe

by Manolya Tufan -
  • 17/02/2020 (09:33)
In Europe, PE sellers managed to achieve modest increases on their LDPE and LLDPE deals for February despite the stable outcome of ethylene contracts. However, HDPE remained mainly unchanged from January due to the flagging demand.

Producers’ aim to recover margins pulls LD, LLDPE prices up

Spot LDPE and LLDPE c4 film offers increased by around €10-20/ton for February despite stable ethylene contracts. This was attributed to producers’ determination to recover their margins amid multi-year low prices.

Nevertheless, HDPE film remained under pressure from ample supplies and weaker buying appetite. Subsequently, initial hike attempts proved unworkable and mostly rollovers passed on HDPE deals.

On a side note, LDPE, LLDPE and HDPE film prices stand below the monthly ethylene contract level.

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

Spot naphtha and ethylene down on weaker oil

However, the sentiment eased off as European PE buyers moved to the sidelines due to the softening spot naphtha and ethylene prices.

According to ChemOrbis Price Wizard, spot ethylene retreated by around €40/ton in the past three weeks to €760/ton on FD NWE basis while spot naphtha on CIF NWE basis has declined around $70/ton since mid-January.

Energy markets have plunged amid fears over the COVID-19 outbreak in China. ChemOrbis Market Snapshot shows that Brent crude oil prices have declined around 22% on average since early January.

Weaker China weighs on March PE outlook in Europe

China’s PE market started the post-holiday period on a weaker note, as the growing impact of the coronavirus outbreak has been dampening the sentiment and keeping trading subdued. Prices in the country are lower amid ample supplies and poor demand.

Voicing their concerns over Chinese demand, European PE players are wary of a shift in trade flows in the coming days if the outbreak cannot be contained anytime soon in China.

The March outlook is in limbo between lower costs and European PE producers’ aim to recover their margins. Regional suppliers suffering from squeezed margins may try to hinder any price drops regardless of the March ethylene contracts, a trader reported.

A packager said, “Demand in the packaging and film sectors is tepid while supply is ample. March ethylene contracts might settle with decreases of €20-30/ton if naphtha prices continue to decrease. However, we expect rollovers in March PE deals as prices are already too low.”
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