FocusEurope producers raise PP, PE prices

07 January 2008 17:55  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS news)--Producers are increasing polypropylene (PP) and polyethylene (PE) prices for January across Europe, as oil and naphtha apply strong cost pressure down the chain, market sources said on Monday.

Producers intended to at least cover the €78/tonne ($113/tonne) ethylene and €57/tonne propylene first-quarter increases from their converters.

Converters were fighting the hefty hikes targeted by some PP producers, but buyers of some grades of PE would find it difficult to avoid large increases, they agreed.

“We have accepted a €50/tonne increase, with producers asking for another €20/tonne in February,” said one major European PP buyer.

“They have got €40/tonne out of me and that is all they are getting, said another. “Product is not tight.”

While some buyers were prepared to confirm hikes of €40-50/tonne for January PP business, sellers were still looking for more, intending to cover the €57/tonne C3 hike.

Homopolymer injection PP prices were approaching the €1,300/tonne FD (free delivered) NWE (northwest Europe) level.

Several buyers felt that there was little room left for significantly higher prices in the PP market. They argued that product was readily available and that passing on increases downstream was increasingly difficult.

2007 had seen an almost continuous stream of price hikes for both PE and PP as oil and naphtha rose and production was curtailed.

PE buyers were under more pressure to accept substantial increases, as product was often in tighter supply than PP.

Linear low density polyethylene (LLDPE) was in particularly tight supply and some converters were concerned over obtaining volumes in early 2008.

C4 LLDPE spot prices were high as imported volumes were reduced during the latter part of 2007, and European producers moved away from commodity grades ahead new capacity from the Middle East coming on stream during the second part of 2008.

Markets globally were strong and Asian demand was pulling Middle East material eastwards.

“It will be a very tight six months. Most European suppliers are easing out of C4 supply in anticipation of Middle East production,” said one major European LLDPE buyer.

“Meanwhile the cost of transport and high oil is having an impact on everything,” he added.

One buyer reported that it had been forced to abandon its usual end-month retroactive settlement of low density polyethylene (LDPE) as the account’s regular supplier refused to deliver as long as the price was not settled.

“I have had to pay €70/tonne more than in December,” a company source said.

Producers were not willing to confirm what they considered to be so modest an increase, and they were still aiming to cover the €78/tonne increase in first quarter ethylene and add margin which they said they had lost in the fourth quarter 2007.

“They are making money while they can,” said one buyer on Monday. “Things will change when the new capacities come on stream.”

“The first two quarters will be strong. There are no significant new capacities due on stream and demand is good,” said a PE producer on his expectations for 2008.

“I expect imported product from new capacities to begin to have an impact in the fourth quarter of 2008. It is the third quarter that is not clear for me. It could be strong, or it may start to ease back by then.”

($1 = €0.68)

By: Linda Naylor
+44 20 8652 3214

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