Europe PE sellers eye margin rebound in May hikes

24 April 2008 17:56  [Source: ICIS news]

LONDON (ICIS news)--Several polyethylene (PE) sellers aim to increase prices in May to recover margins despite downward pressure on most grades, they said on Thursday.

“Margins are terribly low at the moment. They are way below what is acceptable,” said one major producer.

“These high oil and naphtha prices are frightening,” said another. "The trend must be reversed."

While most sellers agreed that margins had eroded significantly in 2008, a couple saw little possibility of an upward price move in May.

Low density PE (LDPE) monthly prices had fallen €30/tonne ($48/tonne) so far this year, leaving gross levels just above €1,300/tonne FD (free delivered) NWE (northwest Europe).

This contrasted with upstream ethylene, with the first quarter rising €78/tonne and the second quarter €15/tonne.

“While I would love to increase prices next month, in view of the current market landscape, I can’t see it happening,” one said.

Buyers were very sceptical. “They are just doing this to stop prices going down further,” commented one major buyer. “There is no way prices will increase next month.”

Several large buyers were still discussing the amount of decrease they would achieve in April.

Slow demand, coupled with the effect of the weak dollar, impacted the European market.

Dollar-based imports were drawn into Europe, and continental producers were unable to compete in export markets against low-priced product.

Sellers expected the effect of INEOS Polyolefins’ force majeure on linear low density PE (LLDPE) in Grangemouth, UK, to have a firming effect on an already strong market, but market sources expected other grades to erode further next month.

Actual targets for higher prices were expected to be made public in the coming days.

PE producers in Europe include SABIC, INEOS Polyolefins, Dow, Total Petrochemicals, LyondellBasell, Borealis and Repsol.

($1 = €0.63)

Click here to find out more on the European polyethylene margin report

By: Linda Naylor
+44 20 8652 3214

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