Many European PE producers had to grant price reductions in June that were well in excess of the fall in the ethylene reference price. Only occasionally were they able to limit the cuts to the decline in costs. As a result, producers’ margins dropped for the second month in succession.
The low-density film grades were particularly weak, and in many cases had to pay the price for the product surplus. Although business was stimulated by the lower prices, many buyers continued to hold back as they sensed the prospect of further reductions in July.
In that respect, they are not entirely wrong. The ethylene reference for July, which is the major yardstick for PE pricing, went down again – this time by even more than in the previous month, namely by €50 (US$57) per tonne. Similar reductions are thus more or less on the cards.
Producers were hoping for a trend turnaround before the end of July because, once sold, the material will cease to put any pressure on stocks and, at the same time, the recent lively influx of imports seems to be on the decline. Presumably, speculative buyers will quickly stock up with material as soon as they see prices becoming close to bottoming out.