At the present we can report about the prices offered by the producers only, no significant contracts have been made so far. The price policy of CE producers was in line with our forecast from last week. In case of polyethylene prices dropped by 20-40 € while in case of PP the typical price drop was 0-20 €, depending on the grade. They base all these decisions on their short inventories. This policy seems to work in Central Europe, buyers seem to accept price drops that do not follow monomer prices, sometimes even roll-overs. But producers in WE go another way in local price policy, they follow their non-differentiated price strategy that is they adapt their prices like those in WE. This is bad news for local producers, because for example in case of LDPE local producers typically reduced their prices by a maximum of 40 €, while one of the biggest WE producer reduced its price by almost 70 €. It is also part of the truth that in this way prices are almost on the same level. In case of LDPE the recommended average prices are now between 1,310-1,330 €. However there are also cases when a WE producers who did not play a too significant role on the market before, offers LDPE at a reduced price of 1,290 €/ton. This is where it can be seen how difficult the situation is, as in WE a price drop following monomer prices happened, prices were reduced typically by 50 €. But buyers seem to keep waiting, therefore the pressure to sell increases, and one of the potential relief valves is CE. On the other hand it is obvious that CE producers cannot sell either in the West, as their buyers expect a price drop at least following, or rather exceeding the price drop of monomers. At the present seemingly there is a risk that significant inventories would accumulate at local producers, and that because of the lack of demand in WE could generate significant sales below the price in Central and Eastern Europe. The danger is mitigated by the shutdown of the BOP in September, however LDPE prices and the market are still in danger.
The situation will come to a climax next week: will buyers keep waiting in WE, or will they start buying? The question is also, if on the WE markets CE producers are willing to further reduce prices, preventing local price erosion. The answer to both questions is yes, however during September and October we shall anticipate the appearance of cheap WE lots causing interference on the market, first of all through traders, as the plants of most European producers will probably be “at full speed” in the autumn.
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