Snowballing difficulties in shipping polymers along the river Rhine are playing a crucial role in polyethylene contract negotiations in Europe, lending support to prices even as several other factors are weighing on them, trading sources said this week.
Most polyethylene contract prices in Europe have managed to remain flat so far, despite the November contract for ethylene settling Eur10 lower than October at Eur1,135/mt FD NWE.
PE contract negotiations usually take their direction from the settlement of the ethylene contract. Other factors that affect ethylene and PE prices, including ethylene feedstock naphtha and fundamentals, are weighing on PE prices. A recent rise in PE imports from the US has particularly pressured PE grades.
This November, even though the ethylene contract settled lower, PE producers either asked for a rollover or have gone ahead to nominate some product grades at higher prices. While nominations for low density polyethylene and linear low density polyethylene have mostly come in at a rollover from October, one large producer has nominated high density PE prices at levels as much as Eur30 higher than October. Another major producer has announced price increases for all grades.
"Rhine water levels are low and that is making it difficult for us to ship products. Supply is tight at some points," a producer said about the company's decision to raise nominations, with other market sources making similar comments.
Rhine levels at the choke-point of Kaub in Germany stood at 49 cm Wednesday, well below the crucial 100 cm required for double-hull barges to ply the river's waters.
Even pipelines, previously immune to Rhine water levels, have suffered this time -- with crackers getting less feedstock naphtha they are running at low rates, reducing the supply of downstream products. Ethylene supply in the eastern section of Northern Europe's Aethylen-Rohrleitungs-Gesellschaft pipeline has been curtailed with low Rhine water levels cited as one of the key reasons, a spokesman for the company that runs the pipeline told S&P Global Platts. This is expected to serve as a cushion for prices across the ethylene-PE chain.
On the side of PE consumers, the indications are mostly for a rollover from October. This is in contrast to what had been heard through the month of October when consumers had not only expected a sharp drop in ethylene contracts for November but also a corresponding decrease in polyethylene prices.
European consumers have expected a drop in ethylene contract prices for the past three months, but prices have either rolled over or risen during the period. Some consumers had expected the ethylene contract for November to drop by as much as Eur50, but trading sources said tightening of polymer supply served as an argument for the contract settling just Eur10 lower.
"It's ridiculous," said a converter summing up the ethylene settlements.
A trader said he had expected a drop of at least Eur20. "The ethylene [settlement] went half way through," he added.
The LDPE contract price for December was last assessed at Eur1,425/mt FD NWE, the LLDPE C4 contract price at Eur1,345/mt FD NWE, LLDPE C6 CP at Eur1,400/mt FD NWE, HDPE injection CP at Eur1,370/mt FD NWE, HDPE blow CP at Eur1,380/mt FD NWE, and HDPE film unimodal CP at Eur1,390/mt FD NWE.
