Europe PE sellers set on more hikes in Feb

17 January 2008 15:39  [Source: ICIS news]

LONDON (ICIS news)--European polyethylene (PE) producers were beginning to prepare their customers for more increases in February, as the full €78/tonne ($115/tonne) first-quarter ethylene hike would not be covered in January, market sources reported on Thursday.

“We are looking to cover ethylene fully and also retrieve margin we lost in the fourth quarter of 2007. Ethylene went up by €20/tonne in the fourth quarter last year, and PE prices dropped by €15-20/tonne at the same time,”said one major PE producer.

Another major PE producer was considering an increase of €50/tonne for February, after falling short of covering the first-quarter ethylene hike by €10-20/tonne.

Other producers reported less success with January increases, confirming hikes closer to €50/tonne on some PE grades.

C4 linear low density PE (LLDPE) remained the strongest of all polyethylene grades in January and volumes were good, but weaker demand was generally noted for other grades.

Low density PE (LDPE) prices were settling in the mid-€1,300s/tonne FD (free delivered) NWE (northwest Europe) on a gross basis for January, and LLDPE prices would be set in line with LDPE, as usual, at the end of the month.

Several players expected the gap that had grown between LDPE and LLDPE to reduce from fourth-quarter levels of up to €80/tonne, to the more traditional €50-60/tonne, as LLDPE availability tightened.

The tightness was due to less availability of imported material into Europe in the fourth quarter last year and a shortage of co-monomer butene.

One PE producer sounded a note of caution regarding the latest round of proposed hikes.

“We can try to regain lost margin from the fourth quarter, but I am not so sure that the market will take it. Prices are based on supply and demand, after all.”

Buyers were dismissive of such aims.

“They have had a superb 2007 and made money on both monomer and polymer, while we have been faced with non-stop price increases since the beginning of 2007,” said one buyer.

“Oil prices have eased, the dollar is weak. They should be satisfied with covering the ethylene increase.”

($1 = €0.68)

By: Linda Naylor
+44 20 8652 3214

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