Limited avails restrict procurement of PE and PP at lower prices in Europe

15-Nov-10
European buyers of polyethylene (PE) and polypropylene (PP), on account of limited availability, have not been able to procure lower prices as they had confidently anticipated by the end of 2010, as per ICIS. Relief in pricing was expected by year end, in a year where constant round of higher prices became a common trend. Delays in new capacities in the Middle East, coupled with careful monitoring of output of European product and, production constraints caused by strikes in France last month, meant that most PE and PP grades were not in oversupply. Low density polyethylene (LDPE) availability was restricted globally, and European buyers were even faced with higher prices in November. Permanent capacity closures in 2009 had not been fully covered by two new LDPE capacities in Sweden and the UK, and UK buyers in particular were faced with hefty price hikes in November. High density polyethylene (HDPE) and PP were also firmer than most buyers had expected. Several sources put the reason for the current unexpected strength of the market down to the situation in France, where strikes in October led to several declarations of force majeure. Total Petrochemicals had already held a long-term declaration of force majeure in place for PP, and the strikes in France exacerbated this. Only C4 linear low density PE (LLDPE) is considered to be weak. Imports are prominent and the traditional €50/ton gap between LDPE and C4 LLDPE had leapt to €150/ton, and is expected to remain, as improved offers resulting from new capacities were made in Europe. However, the effect of lower prices in the C4 LLDPE sector was beginning to have an effect on demand, as blenders [of LDPE and C4 LLDPE] are using as much LLDPE as they can.
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