Sentiment firms up in European PE markets, LDPE poised for increases

The sentiment surrounding PE markets has pivoted following developments in the PP market, where bullish signs had earlier emerged given disrupted import flow. A shift in the supply outlook was blamed for the changing sentiment, buoyed by regional production hiccups and upcoming autumn turnarounds. Accordingly, polyolefin markets brace for a stable to firmer trend in July regardless of the monomer outcome.

Price indications for July higher after 3 months

The PP market has already hit the bottom amid firmer expectations for July, driven by supply disruptions. Although prevailing supply levels are still deemed comfortable, players anticipated a potential tightening considering force majeures at home and a dearth of imports from South Korea in particular.

Following suit, more players expect hike attempts from PE producers next month, even though ethylene contracts are awaited with rollovers to small drops. This would pull Europe’s PE markets up after 3 consecutive months of lower pricing, with expectations centering on rollovers to €30/ton hikes depending on the grade.

Meanwhile, some import suppliers already approached the market with hike attempts for July. Middle Eastern producers have shared most recent offers with increases, reflecting the confidence in future pricing trends. A buyer also confirmed higher LDPE offers for Middle Eastern origins with delivery in July. Elaborating further, he added, “Producers may seek hikes amid tightening LDPE availability. Our regular supplier is facing some production issues.”

Supply jitters at home keep buyers on their toes

PE markets had earlier been unresponsive to the surging freight rates as a lack of import flow from Asia would only underpin prices rather than pushing them higher. However, sellers pointed to the changing supply outlook amid some regional production hiccups and upcoming turnaround season in autumn.

Apart from disciplined and prolonged rate cuts, ExxonMobil declared force majeure in Gravenchon site due to labor dispute in late May. LyondellBasell restarted its LDPE plant in Berre as of early June and lifted the force majeure, while the producer reportedly has short supplies. Versalis and MOL also face some production hiccups, although issues at the latter producer were not confirmed by primary sources.

Furthermore, several plants will undergo maintenance shutdowns by autumn. Hence, producers want to build safety stocks ahead of the turnaround season. This usually translates into lower spot volumes from producers, who prioritize fulfilling contractual commitments first via building stocks to cover periods when there will be no output. This precautionary measure is expected to further strain availability in the coming months.

LyondellBasell plans a maintenance shutdown at its Wesseling site between August and September. Furthermore, maintenance schedules were not disclosed at the time of writing.

Buyers in Italy likely to hedge against future hikes

Uncertain supply conditions keep buyers proactive in their purchasing decisions, while buyers in Italy seemed more concerned about firmer voices for July when compared to the buyers in West Europe. This was attributed to the summer vacations starting in Germany and Benelux from July.

Meanwhile, Italian players who usually leave for holidays in August started to inquiry their suppliers ahead of potential hikes next month. A buyer closed some HDPE b/m deals with rollovers to avoidpaying increases in July.

Players pin their hopes on potential pre-buying activities. Some buyers may secure extra stocks ahead of September, driven by firmer voices. This would provide sellers with the leverage to lift their prices despite the traditional summer lull. Since availability is dwindling, sellers may seek increases for LDPE in particular, also bearing upcoming turnarounds in mind. A distributor has noticed increased inquiries for LDPE, as a side note.

Will it be possible to achieve hikes on deals?

On the flip side, stable to slightly lower monomer expectations and the persistently sluggish demand may alleviate potential upward pressures and lead to a steady pricing environment depending on the grade. It is crucial to underscore that demand will be patchy in Italy and West Europe amid summer holidays in July and August, and concerns over supply disruptions may not spur significant replenishment activity before September.