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Oct PE pricing under discussion amid rising costs, tepid demand in Europe

by Manolya Tufan - mtufan@chemorbis.com
  • 11/10/2021 (03:12)
After closing September on a stable to softer note, PE markets across Europe witnessed a shift in sentiment as October started. Rising production costs, scarcity of imports, and global firming were blamed for suppliers’ firm stance.

Some suppliers approached the market with increases varying in size. Offers emerged with hikes of €25-60/ton or €100/ton in a few cases amid rising feedstock and energy costs, with negotiations underway. Meanwhile, rollovers also ensued under the shadow of tepid demand and comfortable availability.

Energy crisis comes into play

Despite earlier expectations calling for a stable to softer trend, PE markets have made a bullish start to October as Europe is grappling with fuel and natural gas shortages. A few producers in Europe have already stated that they will implement a surcharge on their resin prices in a bid to tackle steep hikes in energy costs.

According to a letter sent to its customers, LyondellBasell has decided to implement a natural gas and electricity surcharge on all its HDPE and LDPE orders as of November 1, 2021.

Meanwhile, participants reported that two regional producers sought hikes of up to €100/ton for October, pointing to their squeezed margins as a result of higher input costs like electricity.

However, such large increases were not included in ChemOrbis Price Index since buyers’ reaction to 3-digit hikes has been tepid.

Supply-demand rather balanced in Europe

Buyers stuck to the sidelines as they wait to hear other suppliers’ price announcements.

According to the market feedback, buying appetite is slow to absorb large hikes. Buyers mostly count on their existing stocks amid slowing buying appetite in some sectors and purchases have been hand to mouth.

Recent hike requests have not created major concerns among buyers. Players do not expect large hikes to work particularly for LDPE, which is already at an all-time high. However, LLDPE prices are under pressure from a lack of imports.

Several manufacturers reported, “Modest demand and comfortable availability will probably keep October hikes in check. We expect rollovers to small hikes to pass on deals.”

Despite dwindling import cargoes, overall availability across the region improved and players report a better balanced market in terms of supply-demand dynamics compared to the previous months. Meanwhile, HIP PetroHemija lifted the force majeure on its PE output from Pancevo, Serbia.

Hence, rollovers were no surprise to market participants as some regional players elected to keep their offers stable from September.

Price gap between European and import origins narrows

Non-European PE origins witnessed hikes for another month, with offers emerging €50-70/ton above September levels. Exacerbating shipment delays and surging freight rates prompted import suppliers to lift their offers to Europe, not to mention globally firmer prices.

Since European origins have been stable or increased only slightly so far, the gap between spot ranges and non-European origins narrowed.

Is resumption of imports feasible amid shipping turmoil?

In the import market, US LLDPE C4 film was offered with €70/ton increases from September at €1520/ton DDP, with delivery in November. Players are evaluating whether or not US PE will be heard more frequently in Europe towards year-end, considering the fact that Europe is offering one of the highest netbacks across the board.

On the other hand, traders have been doing back-to-back business recently to avoid risks stemming from shipment delays amid container shortage. According to players’ reports, HDPE film and LLDPE supplies are dwindling amid logistical challenges and production issues.

Should imports continue to be curbed by lingering shipping bottlenecks and cost escalations, European buyers may be more reliant on domestic supplies in the upcoming period.
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