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Soaring energy markets fail to prop up olefin, polyolefin prices in Europe

  • 14/11/2017 (09:56)
In Europe, spot ethylene and propylene prices have failed to respond to the latest surge of the energy complex, where Brent futures hit two-and-a-half-year high and spot naphtha prices saw their highest levels of 3 years, mainly due to the lack of availability concerns across the region.

Spot ethylene market felt the downward pressure from long supplies to a larger extent while the downturn of propylene prices was partly underpinned by rising crude oil futures. All crackers in the region were reportedly running at full rates, along with the fresh restarts from Borealis, OMV and Versalis.

According to ChemOrbis Price Wizard, spot ethylene prices have posted cumulative falls of around €60/ton on average since the end of October while propylene prices have recorded a relatively smaller decrease of €30/ton since mid-October.



Downstream PP and PE markets were also unresponsive to the surge in naphtha and crude oil prices as poor year-end demand and comfortable supplies came to the forefront, as was anticipated earlier.

Even though sellers approached the PP market with rollovers initially both in Italy and Northwest Europe, the Italian PP market was the first to concede to discounts of €20/ton in response to dull demand. The PP market in Northwest Europe, meanwhile, was relatively firmer as discounts did not come immediately, although buyers still expect to see lower levels as the month wears on.

A buyer from Italy commented, “We heard that PP prices are being offered €20-30/ton lower for November. We are using our existing stocks for now as we want to see if prices have room to decrease further this month. Still, we keep a close eye on upstream markets as crude oil prices have risen significantly.”

In parallel to the steeper decreases in the ethylene monomer, PE prices have witnessed larger decreases ranging from €20/ton to €60/ton so far in November. Sellers both in Italy and Northwest Europe have had to step back from their initial rollover requests due to the resistance on the buyers’ side amid comfortable supplies. Nevertheless, this has not stirred buying interest as buyers expect to see further decreases in the coming days due to the holiday season in Europe.

A distributor in Germany closing November deals down €30-40/ton said, “We stepped back from initial rollover attempts on low demand. LLDPE and LDPE film prices are under pressure as supply is ample. We think that prices will fall further in December ahead of the year-end while they will rebound by January.”

Players both in the PP and PE markets are now questioning whether stronger energy markets will confront further softening and prove supportive for bottoming-out or whether weak demand and comfortable supplies will continue to dominate the market.