European PE producers confident for 2016

LONDON (ICIS)–European polyethylene (PE) buyers have been under the cosh for much of 2015 and it looks as though this situation will continue into December and well beyond, sources said on Friday.

The big changes in the euro/dollar exchange rate have been the principal reason Europe has been short of imports in 2015, sources said, and the tightness was exacerbated by several unplanned outages earlier this year.

November supply is still tight, and producers are yet again able to improve the spread between ethylene and PE and this is something that some have said they plan to do again in December.

“I am in their hands… it’s a very tough period,” said a low density polyethylene (LDPE) buyer.

“They [producers] are all sold out,” said another. “It’s a privilege to buy from them.”

Contractual buyers have not been complaining of shortages in November, unlike in mid-2015, when production lines had to be closed for lack of PE, but converters with no formal contracts in place have had difficulty getting what they need.

Spot offers of LDPE above €1,400/tonne FD (free delivered) NWE (northwest Europe) have been traded, but often only at desperate accounts, while levels below €1,400/tonne were seen as a more normal price level.

There was very little spot product available, however, and prices were too high for buyers to take product in for stock.

On the whole, buyers have not had the chance to build any stock and December demand was also looking strong, said sellers.

“November has been the strongest order load this year,” said one, “and December is looking the same.”

With the euro expected to continue trading low against the US dollar, and crude oil not expected to change significantly, sources said they could not see any reason for 2016 to change.

“I can’t see any trigger that could happen to change this situation in the short term,” said a producer.

Some buyers grudgingly acknowledged that things might be difficult next year, but one large buyer saw a glimmer of hope.

“They [producers] shouldn’t be too confident,” it said. “There is more and more attention being taken of the situation in China, it’s getting really weak now. Middle Eastern producers might realise that supplying to Europe maybe not such a bad idea.”

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

Focus article by Linda Naylor

Original Article Posted On ICIS