PE producers defy lower C2 contracts in Europe on margin recovery targets

After two months of an uptrend in Italy and West Europe, September has seen initial price hike attempts of up to €50/ton for LDPE while rollovers emerged for the other grades. This is opposed to the ethylene contracts which settled with €25/ton reductions earlier this week. Apparently, tight availability and uncompetitive non-EU origins have mainly underpinned sellers’ motivation for margin recovery. However, participants are widely discussing whether recent hike attempts will be workable or not amid calm demand.

LDPE under more visible upward pressure

Some producers have approached the LDPE market with price hikes of up to €50/ton given limited supply and tight margins. Apart from some productions issues across the bloc, turnarounds at regional plants have reduced supplies further, together with disciplined rate cuts and ongoing force majeures. HDPE and LLDPE products, meanwhile, have remained mainly stable, although small hike attempts were also seen in a few cases.

Will non-European origins regain competitiveness?

Restricted volumes from the US have helped regional producers to keep their prices firmer, with more buyers relying on local volumes to meet their needs. PE allocations from South Korea and the Middle East were also limited, although freight rates started to decline in the previous months.

However, locally-held US material still formed the current low ends of the ranges in Italy while traders confirmed that shipment cargoes with delivery in October were not competitive in the previous weeks. Players are closely monitoring the import market now as fresh prices might emerge with modest reductions also considering the softer trend in freight rates.

In West Europe and Italy, price assessments stood at €1280-1350/ton for LDPE film, €1180-1280/ton for LLDPE C4 film and at €1210-1300/ton for HDPE film, all on FD, 60 days deferred payment basis.

Demand will have the final say

Converters have fully come back from their long summer holidays, but they have remained sidelined in the first week of the month. Some are already covered with the pre-buying done in late July or early August and they plan to skip purchases this month. Others, meanwhile, are still searching the market before engaging in fresh purchases as they hope to see some price changes later in the month.

Suppliers are now waiting to see the market response, while some do not exclude closing September deals at a rollover in case demand does not pick up. A trader commented, “Buyers are more open to pay rollovers while increases are out of the question for them. Yet, we exclude possible decreases for now as our supplier seems determined to recover some margins.”

The PE market is expected to remain on a stable to firmer note for the days ahead. However, it is still early to say if producers can achieve hikes as post-summer restocking activity will have the final say.