Will limited PP, PE supplies restrain bearish trend in Europe?

19-Nov-14

PP and PE players in Europe have started to voice their December expectations with decreases for another month, as the ongoing losses of the energy markets continue to dominate the outlook, as per ChemOrbis. In line with the steady losses of Brent crude, European spot naphtha prices have lost around US$60/ton since early November, hitting its lowest level since July 2010. However, players do not expect to see decreases in December as sharp as they were in November, which is mostly due to limited supplies. Players have been reporting availability concerns particularly for HDPE film across Europe for some time while complaints about restricted PP availability have also surfaced recently. “As long as energy markets go south, this factor will continue to overshadow these supply concerns. However, they may only help keep the downturn in check,” concur many players. These availability constraints have already caused the decreases that passed for HDPE film in November to be limited. Monthly decreases of €40-50/ton have passed for HDPE at maximum although other PE products have seen decreases of up to €70-80/ton across the European spot market. A distributor who sold Middle Eastern HDPE only €20-30/ton below last month in Italy argued, “Sellers appear to be feeling free from sales pressure despite the weak market conditions. Feedstock costs are bearish for now, but producers may continue to keep supply short in December to lend support to prices.” Monthly decreases of up to €60-80/ton were also reported in Northwest Europe for November PP deals with many sellers trying not to concede to the full decrease of the propylene contract, which saw €90/ton decreases. A distributor in Belgium reported limited availability for PP this week, arguing that they concluded deals only with €30-40/ton decreases for November. Players in Germany also reported that decreases of just €40-60/ton have materialized for November in the PP market. According to ChemOrbis, talk of tightness for PP was more evident in Southern Europe, where an Italian converter made some purchases with decreases of €70/ton from last month, but reported facing difficulty in procuring all the volumes he required. A compounder in Italy confirmed short availability and stated that he made some purchases with discounts of €50/ton from different suppliers.