LONDON (ICIS news)--Polyethylene (PE) players are noting a slowdown in activity amid offers of cheaper imported material in March, leading to some buyers’ expectations of lower prices for the first time in many months, market sources said on Monday.
“This is the first time for months that we have been able to realistically expect lower prices,” said one large low density polyethylene (LDPE) buyer, who reported just a $15/tonne drop in its March LDPE business, still leaving the gross (Euro)1,345/tonne FD (free delivered) NWE (northwest Europe) price level only $15/tonne from LDPE’s record high.
LDPE spot was declining more rapidly, with most business reported at (Euro)1,220-1,250/tonne FD NWE.
C4 linear low density polyethylene (LLDPE) was looking firmer than LDPE, and some rollovers were being settled for March.
Much LDPE and LLDPE business is done on a retroactive basis and was not expected to be fully settled before the end of March.
Imported product was expected to impact the high density polyethylene (HDPE) market more significantly than the LDPE and LLDPE markets, however, although here too some large buyers envisaged little more than a (Euro)10/tonne drop.
The weak dollar meant that spot prices were under downward pressure and as prices dropped, buyers were more hesitant to move, as prices could fall further.
Imported HDPE blowmoulding was widely offered at (Euro)1,200/tonne FD NWE, with some sellers of imported blowmoulding unable to shift even at this level.
“We are lucky if we can sell at (Euro)1,160/tonne FD NWE. It is often not even a case of price, they just do not want to buy,” said one trader with imported blowmoulding in stock.
Gross prices from European producers had been settled (Euro)10/tonne up in February, in the mid-(Euro)1,300s/tonne FD NWE, but this was now under threat of slipping in March.
“The most we can do is defend a rollover in the HDPE market this month,” said a European producer.
Another contributory factor to the current PE unease was the short-term future of ethylene monomer.
Spot product was on its way from Iran at a very attractive $1,300/tonne CIF (cost insurance freight) Mediterranean price level. This was far from the spot level on the pipeline, which was barely below the (Euro)1,023/tonne FD NWE first-quarter contract level but it led to nervousness in the PE market.
For the time being, ethylene suppliers were talking of a rollover to small increase into the second quarter 2008, based on record high oil prices, and a so far balanced supply and demand scenario.
Any reduction in second-quarter ethylene would find its way into PE, however, and PE buyers were not ready to buy one kilo more than necessary with even the sniff of lower prices ahead.
“What is also important in the PE market, is the general economy in Europe,” said a trader. “Every time you read a newspaper or switch on the radio somebody is telling us how bad the economy is. It is difficult to fight that.”
Despite the widespread expectations of lower prices in the PE market, few players expected anything more than a downward correction, however.
“With oil at $100/bbl we cannot really expect prices to crash,” said a large PE buyer. “Okay, the dollar goes some way in mitigating it, but it is still very high.”
March discussions were expected to be protracted.
PE prices have risen steadily alongside higher oil prices for several years, with only brief periods of slight erosion. Most PE prices have doubled since their 2003 level.
Producers in Europe include LyondellBasell, INEOS Polyolefins, Saudi Basic Industries Corp, Borealis, Dow, Total Petrochemicals, Polimeri Europa and Repsol.
