Europe PE sellers close books as July hikes loom

20 June 2008 13:35  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS news)--Polyethylene (PE) producers in Europe are no longer offering material for June delivery as July prices look likely to increase substantially in line with upstream movements, sources said on Friday.

“We have stopped selling for June. There has already been some pre-buying and we are now waiting for third-quarter ethylene to be settled,” said one major producer.

Monomer discussions were expected to be protracted as ideas were still way apart in a range of plus €80-275/tonne. Large increases based on high upstream costs were inevitable, sources agreed, but the amount was hotly disputed.

PE producers had already begun making July price ideas public, with SABIC coming out first this week with a proposed hike of €200/tonne ($308/tonne) for July.

Others were less vocal but intimated that they would be seeking a similar amount, al;though some said they seek to cover only the increase in third-quarter monomer from the second-quarter level of €1,038/tonne.

A couple of PE producers said that European converters would find it hard to accept hikes of up to €200/tonne next month, given the already record-high price levels.

Converters feared that they would not be able to recover the increases before the situation changed again, as most of their own selling contracts were for three months.

A couple of large converters said that they would simply stop producing grades which produced negative margin.

“If we are offered plus €200/tonne on a take-it-or-leave-it basis, then we will have to leave it,” said one large buyer.

Some PE producers were sympathetic to converters’ arguments but said that they had no choice but to target higher prices, or their margins would be similarly hit.

High oil prices remained a feature of the market, with Brent trading at $133/bbl on Friday.

Players were hopeful that ethylene would be settled imminently so that a clearer picture could emerge for July business.

Low density PE (LDPE) spot was firm and some buyers confirmed levels as high as €1,300/tonne FD NWE. There was a wide spread of prices, however, and a shortage of offers in this sector.

Monthly LDPE prices for June were looking stronger as the month progressed, but most business was already concluded at a €60-80/tonne increase.

Hikes as low as €40-€50/tonne and as high as €100/tonne were also reported for June, but most players agreed that the majority of business was within a narrower spread. July discussions were expected to be protracted.

PE suppliers in Europe include SABIC (Saudi Basic Industries Corporation), LyondellBasell, Borealis, Polimeri Europa, Dow, Repsol, Total Petrochemicals and INEOS Polyolefins.

($1 = €0.65)

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By: Linda Naylor
+44 20 8652 3214

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