PE suppliers close Jan order books in Europe amid firmer outlook

Spot PE prices saw further increases in the second half of the month, with deals being concluded with up to €50/ton gains, depending on the grades. Meanwhile, market sources reported that some PE producers have closed their order books for the rest of January amid firmer expectations for next month.

LDPE under more visible upward pressure

Sellers reported that buying interest has cautiously improved recently due to the widespread projections for firmer prices in February. A few distributors have started to offer their LDPE allocations with €20/ton hikes as of this week on top of those hikes applied earlier in the month. Meanwhile, a few regional producers have stopped taking orders, stating that they are sold out or prefer to hold onto their stocks ahead of renewed increases in February. After January increases, the LDPE market returned to late September levels, according to ChemOrbis Price Index data.

A distributor of a South European producer commented, “Demand has cautiously improved in the second half of the month as many buyers placed orders amid the firmer outlook. However, our supplier stopped taking orders ahead of further gains. We expect small increases on top of the awaited hike in the next ethylene contract.”

Rising import offers sustain a firmer outlook

Traders reported that fresh offers from the US and the Middle East increased compared to the previous month. Notional prices are at €1250/ton for US LDPE and at €1160-1170/ton for US LLDPE, all on DDP basis with delivery in March. A buyer, meanwhile, secured some HDPE film from the US at €1120-1130/ton with the same delivery terms. A trader selling locally-held MDPE from Qatar, meanwhile, reported that his supplier stopped ordering and announced €70-80/ton increases for February.

Although some buyers decided to purchase overseas cargoes with delivery in March, most of players did not find those prices competitive as the gap between import and local prices narrowed in the past few months due to rising freight rates, long delivery times as well as unfavorable euro/dollar parity.

Renewed hike attempts around the corner

As for February, producers are likely to open the month with another round of increases due to firmer upstream costs, uncompetitive import offers as well as producers’ intention to boost their margins after several months of price erosion. Players pointed to the fact that current spot PE prices are on par with the monomer contract value or even below it, citing the unfavorable spread between PE prices and monomer contracts that suppliers have been facing for several months.

Meanwhile, expectations for the next ethylene contract are calling for increases of around €30-50/ton. Market participants believe that producers will apply larger increases than the expected monomer contract surge, especially for LDPE products.