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Will lack of imports prop up European PE market?

by Manolya Tufan -
  • 16/09/2020 (13:13)
September has been a month of rollovers to small decreases in Europe’s PE markets, defying firming in global markets. Unlike other outlets, the lack of fresh shipments from the US amid hurricane related production hiccups had no major impact on the market during September.

The sentiment turned cautiously firmer on the side of sellers as some of them renewed confidence in line with the global firming. Despite lower costs, they argue that prices have no further room to go down as Europe lagged behind other markets.

Europe is an unfavorable import destination right now as other outlets that have seen notable increases recently are offering better netbacks. This factor is expected to curb imports into the bloc in the days to come. Plus, the majority of traders skipped buying US material due to steep increases or some orders were even cancelled, which would eventually lead to reduced locally-held availability in Europe particularly for LLDPE and HDPE grades.

A seller said, “September was a quiet month in terms of activities. Plus, there were sufficient US PE supplies in the locally-held market on top of regional availability. That is why production hiccups did not create major concerns inside Europe during the month. However, this may soon change in case US PE cargos cannot be loaded or other markets are favored.”

A player also commented, “Hurricane season supported PE prices as the US market was forced to deal with a number of outages that took out an important amount of export material. This may support October outlook, while the impact will depend on how fast production can be resumed.”

Meanwhile, a trader reported that European suppliers are already exporting their material to China, where import LDPE prices hit 2-year high amid tightness and satisfactory demand.

A trader argued, “Prices in Europe are lower when compared with other regions. US imports will not be coming in the next weeks both due to disruptions to supplies and poor netbacks. Hence, we think that prices will go up in October.”

On the other hand, lower crude oil and naphtha prices cast a shadow on the monomer expectations for next month. Apart from that, players also point to the widespread concerns about how demand will evolve amid rising COVID-19 cases across the board.

Buyers do not expect to see drastic changes next month, voicing mostly stable to slightly softer expectations. According to them, poor netbacks as well as restricted imports may prop up prices rather than pushing them up as demand is not that bright.

A market participant opined, “We expect mostly rollovers in October. Monomer contracts may settle slightly lower due to weaker upstream costs. Since converters stick to regular purchases, we did not see a boost in demand.”
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