Tight supplies are pushing up low density polyethylene (LDPE) spot prices in Europe to levels of €1000/ton, as per ICIS. Supplies have tightened on account of reduced production at cracker and polymer level for many weeks, coupled with increased exports to Asia. In H1-09, demand in Europe was very weak, prompting cracker and downstream units tp cutback on run rates and increase exports to Asia in a bid to supplement sales at better netbacks than in Europe. In the current market scenario, European demand has improved and several minor technical issues has led to supply constraints - unplanned outage of LyondellBasell’s Carrington LDPE plant and the delayed start of SABIC’s new 400,000 tpa LDPE unit at Wilton in the UK. Producers who have scaled down operations did not have much stock holding, pushing prices up. August spot prices were at €950/ton (US$1340/ton) free delivered (FD) northwest Europe (NWE). September delivery prices have moved up by about €30-40.
The upturn in spot prices this week, leaving net levels above those settled by producers for August, indicated strongly that polyethylene (PE) monthly prices would rise in September, pending settlement of September monthly ethylene prices.
Big increases in polyethylene prices are expected in September on account of very low stocks along the whole chain. Also, at current crude oil and naphtha prices, ethylene is likely to increase significantly in September, and PE would inevitably follow.
Inventory levels with processors were low as they had expected offers from the new capacities in the Middle East to be in the market by now. However, the import volumes are missing as new capacities have been delayed and are progressing a slower rate than had been anticipated
21-Aug-09 
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