European PE market edges up despite sinking oil prices

Energy costs have been on a downwards path on a global scale since July this year, as per ChemOrbis. The relentless decreases gained speed in recent weeks owing to concerns that global oil supplies outpaced demand. In fact, ICE Brent crude oil futures hit the lowest levels of the last four years, while NYMEX futures plunged to two year lows. However, spot PE prices in Europe edged higher this week, particularly for LLDPE and HDPE grades, shrugging off the sharp fall in the energy complex. This was mainly due to higher spot ethylene costs in the region with respect to early October as well as PE supply constraints. ICE Brent crude oil futures saw a cumulative fall to slightly above US$10/barrel since the start of October. European spot naphtha prices touched their lowest levels since October 2010, breaking below the US$700/ton threshold in line with plunging crude oil prices as well as slow demand. The recent figures on CIF NWE basis plummeted US$60/ton on the week and US$125/ton from early October. Despite dipping crude oil and naphtha costs, European spot ethylene prices witnessed consecutive gains until the end of last week, boosted by Shell’s force majeure on their cracker output, until prices stabilized. After stabilizing, spot ethylene prices still indicated a €90/ton increase so far in October. LLDPE and HDPE offers edged up by around €10-20/ton in Italy in line with reports about tight availability for the products as well as firmer ethylene monomer costs. “We have only 75 tons of HDPE b/m available and we applied small increases due to our tight supply,” a distributor reported. A couple of buyers were informed that their suppliers faced short HDPE film availability. Although higher ethylene prices created some expectations for some hike attempts from PE producers, steeply lower naphtha and crude oil markets are likely to put a cap on firming expectations. An agricultural film maker reported, “Our end product demand is slow. We purchased only our needs as we don’t expect any hikes to materialize on PE prices next month.” A distributor in Germany commented, “We applied small hikes on HDPE film as supply is short. Nevertheless, we don’t foresee an improvement for next month since demand is very slow and German economic conditions are not encouraging.” According to ChemOrbis, a distributor in France highlighted, “Our suppliers told us that they don’t have any supply issues for now despite the force majeure at Shell’s plant in Moerdijk. Hence, we will not change our pricing for the next 15 days. Although sellers may try to lift their prices for November, it is too early to make a prediction.”