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Irregular PE origins emerge at competitive prices in Europe

by Manolya Tufan - mtufan@chemorbis.com
  • 21/04/2021 (03:48)
Having wrapped up April deals with massive hikes, players have noticed an increased number of irregular PE origins showing up in Europe, where prices provide record-high netbacks.

The emergence of competitively-priced cargoes in the region’s local markets has put pressure particularly on HDPE grades. There remains the question of whether or not prices will retain strength as we head into May.

Irregular origins stand well below Italy’s spot ranges

Low-priced PE cargoes particularly from Central Asia and Central Eastern Europe emerged in West Europe’s spot markets this week, weighing on the sentiment. LDPE and HDPE offers stood well below the local price ranges in Italy.

On a product-based breakdown, Azeri LDPE was dealt at €1850/ton on FD Italy, 60 days basis. Meanwhile, LDPE offers as low as €1750/ton were also heard from the market. Transactions stand €150/ton and €250/ton below the low end of spot prices for European origins.

Russian HDPE film was dealt €100-150/ton below the low end of the prevailing ranges at €1700-1750/ton FD Italy, 60 days. Meanwhile, Kazak HDPE film was dealt at a more competitive level of €1640/ton with the same terms.

In Northwest Europe, most recent offers stood €50/ton below the low end of the spot price ranges for European origins. Russian HDPE film was at €1850/ton FD, 60 days with delivery in mid-May. Middle Eastern HDPE film was also offered at the same level with the same delivery terms.

Meanwhile, Azeri HDPE inj. was dealt at €1800/ton FD NWE, 60 days.

Players refrain from long distance cargoes

As for imports, US HDPE film was offered at €1750/ton DDP Italy, 60 days. However, players find it risky to engage in import material as they are wary of a reversal of the trend before the arrival of these cargoes.

Europe by far the most attractive region

Global suppliers turned their focus to Europe, which was inevitable amid higher netbacks. An acute shortage sent prices soaring in Europe’s PE markets, which in turn have opened the arbitrage window to the region.

Europe traditionally carries a premium over other markets, while April gains pushed its premium to historic highs.

ChemOrbis Price Index data reveal that the USD equivalent of spot LDPE film prices in Italy currently stands $1020/ton above China, $860/ton above Southeast Asia, and $620/ton above Turkey. Similarly, HDPE film in Italy is $720/ton above Turkey, $945/ton above Southeast Asia and $1085/ton above China. The premium of LLDPE prices in Italy reached $1125/ton over China, $985/ton over Southeast Asia and $665/ton over Turkey.



Will European sellers achieve hike attempts in May?

It is a moot point as to whether irregular origins will undermine regional producers’ hike intentions for May in Europe. Producers reportedly aim to raise their offers further in case of monomer hikes, pointing to the tight regional supplies and robust demand for certain applications.

Regional availability may remain restricted amid lingering production outages, while an increasing number of players expect more imports to arrive starting from late May and early June despite lingering logistics bottlenecks.

Competitively-priced offers came at a time when converters were struggling to find sufficient availability to keep their lines running and a mounting resistance to record-high prices came to the fore across the region.

“Producers may attempt to issue further increases as May kicks off. However, the market will probably not absorb further increases as this is not sustainable anymore,” several players noted.

Turkey market already succumbs to lower levels

In the nearby Turkish market, polyolefin markets yielded to lethargic demand amid the Ramadan lull. Resistance building up on the buyers’ side toward sky-high price levels as well as a nascent relief in supply levels emanating from previously secured cargoes weighed on sellers. Buyers shied away from engaging in fresh cargoes due to more attractive prices in the local market. A few traders opined that import suppliers would divert their cargoes to Europe to attain better netbacks in the near term.
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