Market and product
Europe January PE prices settling at retroactive accounts
“We haven’t finalised January yet,” said one large buyer, “but we expect the full [ethylene monomer contract] €130/tonne drop.”
Ethylene-linked contracts have settled at a drop in line with the ethylene contract fall, but freely-negotiated buyers have been under pressure to accept smaller decreases, thereby giving producers a wider spread between monomer and polymer.
Early settlers in January have been under more pressure to accept a price reduction smaller than the €130/tonne ethylene drop, while late settlers are targeting the full €130/tonne, and several said they had assurances of this.
Producers were not overly concerned.
“We have done everything at minus €110-130/tonne,” said a producer, adding that much depended on the PE grade in question.
Low density polyethylene (LDPE) buyers were fairly confident of getting the full €130/tonne decrease in January, and some were pushing for a drop of €150/tonne from December levels, but this latter position looked less likely, said sources.
C4 (butene based) linear low density polyethylene (LLDPE) is the only commodity PE grade where buyers are not confident of pushing for a bigger price reduction this week.
“We are not sure of C4,” said the large buyer.
PE producers have managed to increase the spread between ethylene and PE for some months now, and some large buyers have said it was about time they gave the full monomer decrease to the market, especially in February, when another monomer drop is expected.
“Prices are more reasonable now but they could be lower,” said another buyer. “Our customers want lower, and they delay buying.”
All market sources are aware that upstream crude oil prices have dropped by over half their value since June, and PE buyers complain that they have not seen the full benefit of the fall in crude pricing demanded by their customers.
More relief is expected to come in February, however, and all PE sources are waiting impatiently for a February ethylene contract to emerge.
“We need material next week,” said one frustrated buyer, “and they [producers] won’t give us a price until ethylene settles.”
The January ethylene contract stands at €880/tonne FD (free delivered) NWE (northwest Europe), and a drop of €60-80/tonne is talked as a possible outcome of discussions for the February contract, said some sources this week.
“For February they [producers] are expecting ethylene to be down by €50-60/tonne, but they want to keep some of it,” said one of the buyers.
Low density polyethylene (LDPE) spot prices have slipped to below €1,000/tonne FD NWE in the lowest cases heard, with most business still being done above €1,000/tonne, on a net basis.
LDPE spot prices were trading at €1,370/tonne FD NWE in July 2014.
January discussions are expected to be done by Friday, just a weekend before February talks start.
Product availability is not long, but the success of whether sellers will be able to hold on to any of the potential decrease of the February ethylene contract will depend on demand.
PE is used widely in packaging, the manufacture of household goods and also in the agricultural industry.
