PE Prices Skyrocket Due to Costly Feedstocks

22 January 2001 00:00  [Source: ICB Americas]

Polyethylene producers in Europe are claiming that they have to raise their prices because of the effects of the closure of ethylene capacity in North America.

Soaring natural gas prices have led to the shutdown of around 20 percent of ethylene capacity in the US, equivalent to 5 percent of the worldwide total.

"Ethylene is being exported from Europe into the US, and there has also been a tremendous increase in European naphtha exports to the US as well, because flexi-crackers in North America are being switched over from ethane to liquid feedstock," says Pedro Suarez, Dow Chemical's commercial director for PE in Europe.

"This is going to lead to a rise in feedstock costs in Europe," he adds. "At the same time, North American PE producers are no longer exporting to Latin America and Asia, which is driving up PE prices in these regions."

Dow announced last week that it would be increasing its prices in Europe for low, linear low and high-density PE by 15 pfennig (7 cents) or an average 8 percent from February 1.

Other PE producers are also striving to raise their prices because of the need to protect their margins in the face of increased feedstock costs.

"We are hoping for rises in our polyethylene prices because of higher costs but not major increases," says a spokesman for DSM.

Some observers say that PE producers are trying to take advantage of the olefins shortages in the US to try to stop a slide in prices in Europe.

"There does not appear to be any polyethylene shortages at the moment, particularly since plenty of new capacity has either come or is coming on stream, particularly in the Middle East," says one polymers consultant. "The producers seems to be using the traditional tactic of declaring price rises merely to stop a price erosion."

European PE prices have dropped 5 to 8 percent over the last two to three months. The first quarter contract price for ethylene is 7 percent lower at á655 ($690) per ton than in fourth quarter while spot ethylene prices have fallen by 25 percent.

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