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PE sentiment shifts on higher ethylene in Europe

by Manolya Tufan - mtufan@chemorbis.com
  • 05/08/2019 (08:57)
In Europe, the PE sentiment has cautiously improved following the slightly higher ethylene settlement for August. Talks of a possible firming trend started to emerge after 2 months of price declines and some PE grades dropping to their lowest levels in 10 years.

Spot LDPE hits a decade low in Italy

Spot LDPE prices broke below the €1000/ton threshold during July, posting strong decreases of up to €80/ton.

According to ChemOrbis Price Index, spot LDPE prices in Italy dipped to their lowest levels since December 2009 on a weekly average. LDPE has posted cumulative drops of around €100/ton since late June.

Spot LLDPE prices both in Northwest Europe and Italy hit their lowest levels since February 2019 while HDPE film prices reached their lowest levels since July-August 2017, according to ChemOrbis data.

Some PE suppliers stopped spot sales to prop up prices in July

Prior to the ethylene settlement, players argued that some PE suppliers might approach the market with rollovers regardless of the ethylene’s outcome, blaming very low PE prices below the July ethylene settlement.

A few players reported that some PE suppliers halted orders during July in an attempt to keep prices in check, meanwhile.

August ethylene settles surprisingly higher

Higher ethylene settlement for August caught many players by surprise. Widespread expectations were calling for drops in the ethylene contracts before the sentiment shifted as of early last week. August ethylene contracts were agreed up by €10/ton , defying earlier spot losses.

Players concurred that the unexpected outcome of the ethylene settlement was stemming from producers’ attempt to push prices up due to their eroding margins.

PE producers aim to push LD, LL prices above €1000 threshold

Voices for possible hike attempts from the regional producers prevailed among players. Fresh offers for August are expected to surface with small hikes due to the PE producers’ attempts to put a cap on the decreasing trend.

They also cited PE prices standing below the monthly ethylene contract level as the reason behind sellers’ decision, which resulted in erosion on the part of downstream producers.

Buyers skeptical about an upturn

Several buyers confirmed hearing voices about possible increases while they do not think that the market might be able to absorb any hikes on the back of the summer holidays, when converters will be out of the market for almost 3 weeks. Plus, some of them have already secured some cargos, taking advantage of low prices.

They reported, “We expect rollovers on PE as prices stand at multi-year lows. However, there are no strong bullish factors to pull prices out of the trough due to the summer lull. Increases are more likely to materialize in September.”

Clouds may not scatter amid escalating trade tensions, plunging crude

On a side note, the news that the US will impose an additional 10% tariff on $300 billion worth of Chinese goods starting from September 1 dampened the sentiment in global markets. Oil prices plunged by nearly 8% following the news.

The escalating trade tensions and movements of upstream costs will be factors to watch amid broader economic concerns across the board.
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