Italy’s PE market giving bearish signals for January
Brent crude futures dropped below $60/barrel on December 18, closing at the lowest level since May 2009. Weighed down by the bearish energy complex, spot naphtha prices have declined by over $100/ton from early December levels to draw near $460/ton CIF NWE. Spot ethylene prices also slumped around €100/ton compared to the beginning of the month to be quoted at €805-810/ton FD NWE.
Bearish upstream markets caused some players to anticipate decreases of up to €100/ton for the awaited ethylene contracts, which would exert greater downward pressure on the PE market compared to this month. Some sellers may still seek to avoid reflecting the entire monomer drop to their January PE prices, pointing to short supply, as was the case this month. However, buyers are unsure whether availability concerns will help contain decreases for another month unless demand is supportive.
A South European PE producer settled their December gentlemen’s agreements with rollovers to decreases of €5-15/ton. A producer source said that they limited their discounts this month due to tight supply. A West European PE producer settled their December contracts with decreases of €20-30/ton for LDPE film while conceding to smaller discounts of €10-15/ton for HDPE due to shorter supply for this product. A source from the producer stated that they expect ethylene contracts to settle with decreases of up to €100/ton for January.
A distributor sold West European PE €10-30/ton below last month in line with his supplier’s guidelines, commenting that demand is weak ahead of the holidays. Another distributor said, “Ethylene contracts are likely to settle lower for January while PE prices may post smaller decreases than the awaited monomer drop as supply remains short.”
Some buyers secured some volumes due to their concerns on availability while others decided to postpone their purchases to January when they expect to see lower prices. A packaging producer reported making some purchases €20/ton below November. “Our December deal levels were above our expectations, but we expect to see larger decreases in January,” the buyer added.
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