PE offers revised down on weakening buying interest in Europe

In Europe, PE sellers yielded to the pressure from deteriorating demand conditions heading towards April. After revealing initial March offers with increases beyond costs in an attempt to recover their margins, regional sellers failed to achieve smooth sales. This was because buyers held back on fresh purchases, citing their existing stocks and subdued downstream consumption.

Rollovers ensue in H2 March

Traders holding stocks trimmed their offers further to concede to rollovers from February or even slight discounts. Still, sellers’ recent move was met with a lukewarm response from buyers, who remained skeptical about the April outlook.

A regional trader remarked, “Rollovers are more widely pronounced due to the deteoriating demand status. Some sellers even tested the market with lower prices, but to no avail. It is hard to move cargos as buyers are covered and they expect to see decreases.”

Prices moved below certain thresholds after witnessing downward corrections compared to the early March levels. Accordingly, price assessments in Italy stood at €1330-1420/ton for LDPE film, €1230-1330/ton for LLDPE C4 film, €1260-1370/ton for HDPE film and at €1250-1350/ton for HDPE b/m, all on FD, 60 days deferred payment basis. Recent price levels indicated €20-70/ton drops from early March levels depending on the grade.

In West Europe, prices were assessed at €1330-1430/ton for LDPE film, €1280-1370/ton for LLDPE C4 film, €1270-1370/ton for HDPE film and at €1250-1350/ton for HDPE b/m with the same terms, standing €20-80/ton below early March levels.

Buyers wary of discounts

Buyers remained sidelined in anticipation of lower prices next month. As they considered March as the last month of hikes, they had secured their needs back in January and February, keeping purchasing volumes negligible so far this month. Currently, stable expectations seem to have been replaced with softer expectations for April amid weak demand and improving supply.

A packager from Italy commented, “We received higher prices early in the month but recent offers were revised downwards. Sellers applied discounts.”

Meanwhile, a different converter reported to have bought some non-European material at aggressive levels, with delivery in mid-April. Elaborating further, he said, “PE prices may be flat until mid-April and then start to recede until June. Arriving imports will weigh on the market, let alone the weak underlying demand.”

Will monomer costs lend any support?

Producers may approach the market with increases next month as ethylene contracts are expected to settle slightly higher amid strong naphtha prices and Brent futures standing firm above $85/bbl. However, initial hike requests are expected to be revised down to rollovers, with demand showing no signs of recovery in April.

It remains to be seen whether or not producers’ attempts to hold onto their offers will bear fruit in the first half of April. Competitive prices in the distribution channel and voices for an imminent reversal will weigh on demand further, not to mention the expected arrival of delayed import cargos.