07 April 1994 00:00 [Source: ICB]
LIMITED SUCCESS in raising polyethylene prices in May and June have left European prices well below world levels. Higher returns for hdPE in the Far East are said to be behind Mobil's decision to notify customers of a reduction in volumes for allocation to the European market from its share from the jointly owned Saudi Yanpet plant. Mobil has declined to say by how much volumes were reduced but with far better returns in Far East, Middle East and African markets sales into Europe are currently a less attractive option.
Polyethylene buyers, who have recently invested in substantial recycling capacity, also need European polyethylene prices to rise substantially. Competitors with no recycling capacity and who are buying cheap prime polyethylene or subsidised recycled material are at a substantial advantage.
Even Russian material, which traditionally tends to be the lowest priced polyethylene available in European markets, has been virtually absent over the past two months. One would have to pay $550/tonne fob St Petersburg for Russian hdPE. Yet Russian material would probably only command around DM1.00/kg in the NW European market. Traders handling Mexican ldPE have also benefited from a lack of Russian shipments.
Traders claim that attempts to put a DM1.10/kg floor on the European ldPE price have not been very successful with prices as low as DM1.02/kg available for material of reasonable origin with DM1.06/kg the top end of the range. Even Far East ldPE prices are now above Europe with the Korean producers said to be insisting on $675-700/tonne.
The differential between Far East and European hdPE numbers is even more marked. Blow moulding grades were still available at 95pfg/kg in June, equivalent to $600/tonne. Far East numbers are now close to $750/tonne.
Yet one player claimed UK hdPE buyers were virtually rioting at £40/tonne hikes announced for July, which came on top of a £20/tonne hike in June. Fina has announced a 10pfg/kg hdPE hike for July and claims that if customers do not agree it will look to Far East markets. Fina is determined to establish a DM1.10/kg minimum price for blow moulding and DM1.15/tonne for film.
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