NOVA sees lean PE inventories driving US hikes

24 April 2008 21:10  [Source: ICIS news]

HOUSTON (ICIS news)--North American polyethylene (PE) restocking demand will raise the chances of proposed 6 cent/lb ($132/tonne or €83/tonne) price increases for April-May, NOVA Chemicals officials said on Thursday.

“In North America, consumption of polyethylene remains strong, and inventories of polyethylene from converters to retailers have gotten very lean,” said chief executive Jeff Lipton during NOVA’s first-quarter earnings call. “In the past this has led to a sharp upturn of orders.”

High resins prices and tighter credit markets have caused players throughout the PE chain to reduce inventories, Lipton said. However, converters have reached a point where they must rebuild inventories in order to continue operating their businesses, he added.

“Once our customers are convinced that price increases will go into place and there is no value in waiting to buy, we will see a significant increase in orders,” Lipton said.

He cited empty railcar return statistics as evidence that an upturn in PE buying may already be happening. The rate of returning cars so far in April is 7% higher than the first-quarter average.

PE producers, facing high feedstock costs, have proposed increases totalling 6 cents/lb, with the increment being split between April and May.

Lipton said spot prices for like PE products are up 3 cents/lb in April compared with March, in line with the proposed contract increase.

US contract prices for low density polyethylene (LDPE) film were 78-81 cents/lb according to global chemical market intelligence service ICIS pricing.

($1 = €0.63)

For more on polyethylene visit ICIS chemical intelligence

By: David Barry
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