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March expectations call for third month of PE increases in Europe

  • 22/02/2017 (04:01)
Following increases of up to €60/ton that materialized on February PE deals, expectations for March surfaced for a new round of hike requests among European players. Firm predictions are based on a strong upstream ethylene market coupled with limited PE supplies in the region.

Although spot naphtha prices edged down to slightly below $500/ton CIF NWE by late last week in response to volatile crude oil prices, ethylene prices in Europe posted steady increases since early February. Rising spot ethylene prices were driven by turnarounds slated to take place between March-May at several crackers across the region. Spot ethylene prices rose by around €85/ton on FD NWE basis week over week, bringing the total increase to €120/ton so far during February. A couple of players expressed their anticipations of seeing €20-30/ton increases on new March ethylene contracts in response to the rising spot market.

“Demand was rather good this month and there might be some material shortness in the next weeks which would pave the way for a fresh round of price hikes in March,” opined a distributor in Italy. A distributor from Germany also reported, “Two of our regular Middle Eastern PE suppliers were not able to supply their regular volumes this month. We received healthy demand this month amidst low inventory levels at converters and we are still receiving orders from our customers. Coming to March, we hold firm expectations on the back of rising costs and reduced supply.”

A large scaled distributor in Europe reported that their suppliers are already applying further hikes on their new price lists. “Therefore, we have revised our PE offers up for our current allocations with overall supplies getting more limited recently amidst satisfactory February demand.”

PE buyers confirm hearing that further increases are probably on the way in the PE market for next month. A converter, who purchased his regular amount for February, reported paying a price at the high end of the market later since he was concerned about additional price increases.

“We did not purchase large quantities of LLDPE due to some stocks we have on hand that will last until mid-March. However, we are hearing concerns about supply issues nowadays,” a stretch film maker in Italy noted. A packager stated, “We paid €50/ton hikes for LLDPE and LDPE. A West European producer revealed larger hikes for LLDPE though given their tight supplies. LLDPE from the Middle East remains tight as well since sellers might have preferred to export to Asia following holidays in China.”

“Our end product demand is performing well these days. We believe March ethylene contracts will settle up around €30-50/ton which could generate €20-30/ton hikes from PE suppliers next month. Moreover, we realized that sellers are not feeling sales pressure owing to reduced availability for PE,” a buyer commented.
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