Market and product

December polyethylene (PE) in Europe is not following its usual slowing trend, as demand is still strong and an upward price move is being considered by suppliers, several buyers said on Thursday.

“One of my suppliers is still pushing for plus €80 [/tonne] for November,” said one buyer, “and they also said they will implement an increase on top of whatever ethylene [contract] does for December.”

The settlement of the December ethylene contract is imminent, and a small increase is expected by most players. The spread between ethylene and PE has increased throughout 2015, leading to a doubling of the spread in the past 12 months.

Any increase on top of ethylene in December would lead to the highest ethylene/PE spread of 2015.

“We’ve got strong demand but why?” asked the buyer. “Our production rates are normal but a lot of customers are placing orders. This is not typical for November and December.”

Several large buyers were seeing the same trend. Some wondered whether endusers were making precautionary purchases following shortages earlier in 2015. If this were the case, they said, this could have an impact on buying in January, but most were struggling to explain why demand was still so strong.

Some PE grades were tight, and buyers speculated that this could be a reason that end users were taking more product than usual, again in response to earlier shortages in 2015.

Linear low density polyethylene (LLDPE) was in particularly tight supply, and at least one producer was informing its customers that LLDPE supply would be tight in December and well into 2016.

“We are being told of an increase [in price] of C4 [butene based LLDPE] from December of €100-150/tonne,” said another concerned buyer. “At the same time they are forecasting a shortage of raw material till middle of next year.”

Against this backdrop of increased demand and the potential for higher December prices, discussions for 2016 were ongoing and producers were flexing muscle to get better conditions and some buyers suspected that the current show of strength form producers was simply a negotiating tactic for better 2016 conditions.

Producers generally reported low stocks across the board, on almost all PE grades, while most traders have little to sell, and many of those that have product are keeping it back for sale in December.

November pricing should be over by next week, and December talks will begin at the same time. Some players expected talks to be quick next month as holidays would curtail activity.

PE is used in packaging, the manufacture of household goods and also in the agricultural industry.