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Softer expectations take hold of Europe’s PE market for November

by Manolya Tufan -
  • 21/10/2019 (04:09)
Initial PE hike attempts for October proved unworkable in most cases across Europe due to the stiff resistance from buyers to the prevailing prices, leading to rollovers. Deals at firmer levels remained few and far between as a bearish sentiment took hold of the market for November.

Players leave for the K fair

Trading activities slowed down further as many players left their desks to attend to the K fair that is held on October 16-23 in Düsseldorf, Germany.

Buyers’ inventory levels are reported to be healthy, which gave them some flexibility to postpone their purchases until after the fair or to the next month.

Suppliers record further margin erosion for October

Despite the €20/ton higher ethylene settlement, some suppliers had to concede to discounts from their initial offer levels in order to generate demand.

“We are struggling with the ongoing weakness in demand amid economic concerns and long PE supplies. If demand remains unchanged, we may see some reductions later in the month,” a distributor commented.

Europe’s Nov PE outlook in the grip of upcoming ethylene contract

To add to this, several crackers are back on stream following planned/unplanned shutdowns. This, coupled with poor derivatives demand, is to strengthen monomer availability in the region.

As a result, weaker expectations for the upcoming ethylene contract are dominating the PE market outlook in Europe. Naphtha costs as well as spot ethylene prices that have followed a volatile path since early October are paving the way for the decrease expectations for November ethylene contracts.

“As for November, we heard voices about strong drops of €50/ton in the next ethylene contracts but we hope to have a clearer idea regarding the PE outlook during the K Fair,” a player reported.

Activities likely to slow down on approaching year-end

Apart from lower upstream, supply-demand conditions are also keeping the future outlook gloomy.

PE prices are widely expected to post drops on scant activities heading towards the year-end amid sellers’ destocking activities, not to mention the reluctance of buyers to commit to fresh cargoes due to shrinking end demand. According to some players, spot market will be less preferable going forward as many converters will switch to the contract market before the year ends in order to achieve their annual volume bonus program.

Nevertheless, a few players hold stable expectations as prices have already been standing at multi-year lows.
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