Europe PE producers aim for further highs in Feb

22 January 2008 18:31  [Source: ICIS news]

LONDON (ICIS news)--Polyethylene (PE) sellers in Europe were making it clear that they would be aiming for more price hikes next month, even before settling all January business, market sources said on Tuesday.

Dow had already announced a formal €50/tonne ($72/tonne) increase to its customers for February, and two other major PE producers said they would also be seeking to achieve another €50/tonne in February.

January business was still not fully settled, but increases of €50-70/tonne were reported across the board.

Producers had still not recovered the €78/tonne increase in first-quarter ethylene, however, and they were determined to push for higher prices again in February.

UK buyers were under particular pressure as the weakening pound sterling meant that buyers were paying less in euro terms than their mainland European counterparts.

“We cannot subsidise the UK market, prices have to go up again” said a PE seller.

PE buyers in the UK paid as much as £90/tonne ($176/tonne) in increases in January.

“They are just getting as much as they can while they can,” said a large buyer on Monday, referring to PE volumes which were expected to move into Europe from new Middle East capacity in the fourth quarter of 2008.

Current PE price levels in Europe were at a record high, and the recent easing of oil and naphtha prices had led to less demand during the second half of January than some sellers had expected.

“Concerns over rising prices are not strong enough to stimulate buying interest,” said another buyer on Tuesday. “I can’t see them taking it too far in February.”

Discussions for February PE business were not expected to get fully under way until the end of January/beginning of February.

The new bi-monthly ethylene settlement for February and March would set the tone for PE, and the direction of this was still not clear as naphtha prices remained unstable

Crude rallied a little, to $87.79/bbl after an announcement by the US Federal Reserve of a larger than expected 0.75 percentage point cut in interest rates, and naphtha followed, ending at $795-805/tonne CIF (cost, insurance and freight) NWE (northwest Europe), up $11/tonne on the buy-side of the range set earlier in the day.

LDPE prices remained well above the €1,300/tonne FD (free delivered) NWE (northwest Europe) barrier broken earlier this month, according to global chemical market intelligence service ICIS pricing.

($1 = €0.69)

By: Linda Naylor
+44 20 8652 3214

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