Polyethylene producers and converters in Europe are bracing themselves for a period of price decreases following lower than expected demand in the first two months of the year.
Buying has petered out in recent weeks and the market is verging on long with producers said to be offering special discounts in order to move material and keep stocks at acceptable levels.
"We are at [a] turning point," a European consumer said Wednesday. "The market is very, very quiet," he said of the lack of buying.
"Stocks have remained high at big converters for several months. [Price] increases cannot pass. Producers have started to offer lower prices," he said.
The monthly contract price of monomer feedstock ethylene increased by Eur20/mt ($25/mt) at the end of January. The increase was initially passed down the chain to polyethylene, but was not sustained, according to most market players.
"Day one, people were going up [in price] with the increase," a trader said. "Day two, they gave it straight up."
Buying in the market has not been as strong as expected for the first two months of 2018. Sources attributed this to most consumers being well stocked following good uptake of deals offered by producers at the end of 2017 to meet end-of-year targets.
With a drop in the contract price of ethylene expected due to lower naphtha and crude oil prices this month -- S&P Global Platts' ethylene CP indicator currently suggests a Eur24/mt decrease -- polyethylene market sources now anticipate continued bearishness in European prices.
"Prices are under pressure, we expect lower pricing starting March," a consumer said Wednesday.
A producer said the weaker prices will impact supply, despite all European plants running well currently. "We will not see a lot of imports coming into Europe," he said.
S&P Global Platts assessed the spot price of low density polyethylene down Eur20/mt to Eur1,200/mt Wednesday. The prices of LLDPE and HDPE were flat on the week.
