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HDPE set to reach a plateau in Europe, LDPE fares better

by Manolya Tufan -
  • 03/05/2021 (10:07)
The uptrend in Europe’s PE markets stretching as far back as November 2020 is widely expected to lose steam moving into May. Whilst HDPE is deemed as the weakest PE grade amid an influx of import cargoes, players concurred that it is more probable for LDPE prices to post further increases.

May expectations call for a stable to firmer trend amid prevailing tightness for certain grades and mounting buying resistance to inflated prices. Indeed, European market provides the highest netbacks for PE sellers across the globe.

Supply bottlenecks to persist in May

Regional availability is expected to remain restricted amid lingering production outages across Europe. LDPE is the tightest grade with 4 force majeures remaining in place at the time of writing. SABIC, Ineos, Versalis, and Total were among the major producers to declare force majeures on their LDPE production, while HIP took its LDPE unit offline for maintenance between mid-March and mid-April.

Ineos declared force majeure on its HDPE b/m and pipe supplies from Lillo, Belgium as of April 2 due to a power outage. SABIC declared a force majeure on HDPE output from its plant in the Netherlands as of February 16. HIP and Basell Orlen Polyolefins’ HDPE plants were scheduled to undergo maintenance shutdowns during April.

Expectations vary depending on the grade

Supply concerns keep expectations somewhat firm, while PE prices are widely believed to see smaller increases compared to previous months as the market cannot digest another round of sharp price hikes. All PE grades stand at all-time highs following 3-digit hikes during the January-April period.

Meanwhile, cumulative increases have reached around 115% for LDPE and 105-110% for HDPE grades in Italy and Northwest Europe since the uptrend kicked off in November.

FD – Italy – Northwest Europe – LDPE - HDPE

Producers intend to issue increases slightly beyond the potential ethylene hike for LDPE amid ongoing shortage. However, HDPE grades may not absorb further increases going forward.

Influx of irregular origins weighs on HDPE

HDPE draws a weaker picture for May, looking at the competitive prices for irregular origins. Import availability will improve further amid arriving cargoes from Russia, the Middle East and Central Asia in the following weeks.

HDPE may yield to the improving supplies and waning demand sooner than anticipated. This is likely to pave the way for rollovers, as a participant put it.

How will demand pan out?

Although demand for certain applications remained robust, traders noticed a slowdown in demand as buyers have already been grappling with inflated raw material costs and solvency problems. Another round of sharp increases would deter buyers from purchasing. An increasing number of converters keep purchases at a bare minimum amid projections for a reversal in June in line with improving supplies.

Supplies may still be limited in H1 May, while overall availability is likely to improve in the latter part of the month. Not only higher netbacks in Europe but also slowing demand in other major markets amid Ramadan lull and fresh COVID-19 outbreaks will prompt import suppliers to divert their cargoes to the bloc.
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