Further dip in European polyethylene contract prices follows spot prices

25-Nov-11

European polyethylene contract prices for November fell further this week as converters tried to narrow the gap between contract and spot prices, as per Platts. However, net contract prices are still higher than spot material available. Although converters reported better end-user demand in November vs September and October, polymer end user markets are slow. In the LDPE market, the premium of contract price over spot touched a record high of Eur305/mt (US$409/mt) on June 29, falling to Eur230/mt mid week. Converters looked to close this gap further, by trying to lever decreases in the contract price following the Eur20/mt decline in the feedstock ethylene contract price for November. With the expectation of a rollover or a "minor" drop in the December ethylene contract price, converters were "urgently" trying to use their bargaining power for November PE contracts. Further upstream, average naphtha values in November have been relatively stable compared to October, triggering expectations of a rollover or a minor decrease for December ethylene contract price. Naphtha has so far averaged Eur637/mt CIF NWE in November, down Eur6/mt on October's Average. Converters said that while order books for technical applications of stretch and shrink films were frail, demand was marginally better in flexible food packaging. PE producers, on the other hand, are trying to restrict the price decline in contracts to the monomer drop of Eur20/mt.