European spot polyethylene business hit by COVID-19 lockdowns

New York — European spot polyethylene traded volumes have declined sharply of late on weak supply chain demand as a number of converting facilities have either cut output or closed due to coronavirus lockdowns, sources said.

"I am at 20% of my normal month but I am not surprised by this big decline because it was my expectation. I expected the first half of April would be the worst," a converter agent said.

"People have enough material. They consume what they have and they purchase what they need. By the end of the month, if we see that the situation is improving then maybe we could see improved movement," the source said.

In a sign of the weaker demand, a European polymer trader has had to switch its PE spot trade towards exports, citing weak or non-existent spot demand in Europe as plastic conversion capacity was down.

"In Europe I cannot do anything. There is no demand. The only thing that we are doing are exports to the Far East...until further notice. Our customers are looking at their stocks, producing what is necessary," the PE trader said.

I won't change anything before Easter is gone. I have the feeling that they [producers] are more in wait and see mode...trying to figure out what to do for April. Are they going to build stocks in anticipation of extra demand in May or stop or cut?" the trader said.

Sources last week indicated April spot low density PE price levels as low as Eur800-840/mt ($874-$918/mt) FD NWE, with linear low levels at a Eur20-40/mt discount to LDPE.

Lockdowns

Sources pointed to truck freight restrictions to stop the spread of coronavirus as limiting or even potentially leading to the closure of some European polymer conversion capacity in the first half of April as converters risked losing manpower to self-isolation or illness.

Plastics converters said the situation last week, going into April, was one of hand-to-mouth buying behavior as a result of the uncertainty about demand for some segments, particularly those that depended on the automotive or other parts of the economy that have been shut down by the lockdowns.

In addition, although demand for flexible packaging has been strong, one that had been boosted by grocery and food stockpiling in March, it was uncertain whether that demand would be maintained once supply chains adjusted.

"One friend who has a meat packing business did extra buying [in March] as they had huge demand for their meat. But now the panic buyers have their meat...demand will go down a lot," the PE trader said.

Meanwhile, border restrictions as a result of COVID-19 have made the task of shipping chemicals and polymers more complicated and, thus, more costly as deliveries take longer.