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Will Europe’s PE market manage to defy pressure in December?

by Manolya Tufan - mtufan@chemorbis.com
  • 29/11/2021 (03:13)
In Europe, players are expecting PE prices to move sideways in December amid lingering logistic challenges regardless of the ethylene’s outcome, expectations for which call for rollovers to small variations.

Whether the markets will manage to resist the pressure from the year-end lull, resurgent Covid cases, weakening global sentiment and, most importantly, the recent plunge in the energy complex is yet to be seen.

Will downward corrections be held off to early 2022?

Spot PE prices across Europe reached their all-time highs in May 2021. After having slid by 10-15% across Northwest Europe in the next couple of months, PE markets have been on a stable to firm note since August, still standing at multi-year highs. Plus, European prices have been standing well above the rest of the globe.

Players are justifying their stability expectations by pointing to the little change in supply situation. Enduring logistics snarls continue to hinder imports while delivery delays have been persisting amid a lack of truck drivers and manpower at ports, which may worsen amid holidays.

Supply to loosen, outweighed by demand

Not much activity is likely to take place as players will be leaving their desks for Christmas holiday. The year-end lull will keep purchases hand-to-mouth without much plans to stock up at such inflated levels.

Plus, downstream demand across major markets has taken a hit from inflationary pressures including still-elevated freight costs, inflated resin prices and rising utility costs. On top of this, Covid cases have reached record highs particularly in Northwest Europe while the new strain, called the Nu variant, sparked fears of fresh outbreaks.

Accordingly, demand is likely to overshadow supply concerns. Thus, improving availability inside and outside Europe will put pressure on the PE market in the following months.

Key to watch will be US cargoes

Early January expectations call for a softer trend as players foresee gradual drops rather than a price collapse. According to buyers, US offers may put pressure on the local market early next year considering the narrowing gap between import and local prices.

Currently, US PE offers stand at par with or close to the prevailing European spot ranges. US HDPE film was offered at around €1600/ton DDP, with delivery in early 2022.

US PE is likely to boost its presence in the European market starting from February. This is because materials from the US will be arriving by around mid-January amid lingering logistical hurdles. Overall supply will improve further once US cargoes start hitting European ports in January 2022, putting pressure on European producers.

LDPE likely to see more notable drops

Since LDPE markets still stand at an all-time high, this grade is believed to have room for more remarkable drops. Indeed, LDPE prices in Italy only dropped by 17% from early May to late September versus larger drops of 18-24% seen in LLDPE and HDPE prices around the same period, ChemOrbis Price Index revealed.

FD – Italy – LDPE –LLDPE–HDPE

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