Market and product

LOW DENSITY POLYETHYLENE

EUROPE

European LDPE spot prices were flat this week, closing June 15 at Eur1,330/mt FD NWE. Contracts were flat at Eur1,550/mt FD.

The spot market was said to be flat and balanced, but LDPE was the shortest of all polyethylene grades, one trader said.

Low density polyethylene is the PE grade least affected by imports into Europe, due to Europe's position as a net exporter of the product, sources said last week.

Europe is a net importer of linear low density polyethylene and high density polyethylene.

Production of polyethylene and polypropylene at Total's sites in Gonfreville and Carling, France, remains stopped, while production of polystyrene remains reduced, the company said Friday in a letter to customers seen by S&P Global Platts.

"Unfortunately we still have no improved visibility on the future situation which is forcing us to maintain the force majeure on all French polymer plants," the company said in the letter, and confirmed to Platts late Friday.

The company added olefins supply from its cracker in Lavera was currently resuming production, which would then allow a restart at its polypropylene facility there.

A national strike is still in force, as well as sporadic blockades of roads in the Gonfreville industrial area, the company said.

Industrial action in France called by the CGT labor union against changes to labor legislation began May 23.

US

US LDPE export prices fell $33/mt week on week, assessed June 15 at $1,224-$1,246/mt (55.50-56.50 cents/lb) FAS Houston, as buyer sources said pricing was softening despite limited supply.

Market participants continued to talk of shrinking volumes available for the period but saw falling pricing levels despite the tightness.

Some sources pointed to the beginning of the lull in demand for the summer months while others said a fall was inevitable as buyers had shrugged off higher pricing.

Traders participating in the export markets said the slowdown in Europe closed off the last major region where demand and higher pricing could work.

Asia and Latin America emerged as the regions deemed most attractive for back-to-back deals.

In contracts, June domestic LDPE contracts were unsettled Wednesday. Buyers continued to talk of needed decreases, but talk of a rollover continued to be accepted, sources said.

May domestic LDPE contracts were assessed flat at 75-76 cents/lb ($1,653.45-$1,675.50/mt) delivered rail car basis.

ASIA

Asian LDPE prices rose on higher discussion levels and a deal done during the week.

Inventories were low and there was not much supply from the Middle East, buyers and traders said.

Chinese domestic prices increased Yuan 75/mt week on week -- the second straight week of increase in a row.

Outlook on polyethylene in second-half 2016 was positive with margins against feedstock naphtha, methanol and coal seen to remain healthy, traders and producers said.

Methanol-based polyethylene margins are to remain healthy as both methanol and polyethylene prices are likely to be rangebound on bearish macro-economic data and low crude values.

Polyethylene-methanol margins in H1 2016 had been healthy ranging around $200-$350/mt, said traders.

They use a formula taking $145/mt for operating costs and a 3:1 methanol to polyethylene ratio.

Integrated polyethylene-naphtha margins are also expected to remain healthy on the back of weak naphtha demand, sources said.

There is surplus Asian naphtha supply as demand has weakened amid a slowdown in petrochemical output.

Many petrochemical plants in Asia were also opting to use LPG as feedstock, thereby reducing naphtha demand.

Meanwhile, outlook for unintegrated producers -- producers who buy intermediate feedstock ethylene to feed into PE units -- was unclear.

The PE-ethylene margin was volatile, trending into the positive in February, but for most of this year it remained in the negative, according to S&P Global Platts data.

Looking forward, a few market sources said the Asian ethylene market would likely be supported, as some key steam crackers in the region are due to shut from August for annual maintenance.

Taiwan's Formosa Petrochemical Corp. for one, plans to shut its 1.03 million mt/year No. 2 steam cracker in Mailiao from August 1 to September 22 for maintenance.

LATIN AMERICA

The Brazilian LDPE import assessment was assessed Wednesday at $1,280-$1,290/mt CFR basis following talks of declining demand.

Market participants said the tighter availability from the US is being offset by the more competitive prices found from the Middle East.

Meanwhile, prices in Asia were heard higher and a sharp increase in freight costs continued to be an issue, sources added.

Market participants said freight rates from Asia increased at least 70% over the past month.

Sources said they were paying more than $100/mt for freight from Asia to Brazil or Peru.

In exports from Brazil to Mercosur countries, the assessment was stable on the week at $1,375-$1,385/mt FOT basis. Market was heard weak in the region amid thin buying interest.

Meanwhile in Peru, the LDPE assessment was down $40/mt week on week to $1,275-$1,285/mt CFR basis Wednesday, based on Middle East origin trading levels talked at $1,260-$1,270/mt CFR basis.

When adjusted for delivery time by a premium of $20/mt, the price was at $1,280-$1,290/mt CFR Peru.

The assessment was in the lower range accounting for weak demand.