Europe PE buyers wary of “excessive” July hikes

25 June 2008 15:54  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS news)--Polyethylene (PE) buyers in Europe expressed their concern and frustration at proposed price hikes for July which they claimed went beyond the increase in upstream costs, several said on Wednesday.

“Dow is talking about €150/tonne ($234/tonne) for July. That is on top of its June hike, which for us averaged out around €80/tonne. This is going way beyond the increase it has had in costs,” said one large PE buyer.

“It is trying to get more margin at the expense of everybody else,” said another.

PE has increased significantly since the early millennium and reached new record highs on a regular basis.

Low density PE (LDPE) has moved from its low point of €620/tonne FD (free delivered) NWE (northwest Europe) on a gross basis in February 2002, to its current end-June level of €1,370/tonne FD NWE.

Brent crude oil, however, has risen from its February 2002 level of $19.61/bbl, to its current price around $135/bbl, while naphtha was at $1,130-1,134/tonne CIF NWE.

The comparison does not show the whole cost picture, but it does demonstrate how quickly and relentlessly costs have risen.

Dow pointed out that there had been no change to this picture so far in 2008.

“For the first half of 2008, our feedstock and energy costs are up more than 40% compared with the same six months of last year,” the company said in a statement on Tuesday.

“Dow will raise the price of its products by as much as an additional 25% in July in an effort to offset the continuing relentless rise in the cost of energy and hydrocarbon feedstocks.”

Other producers had not yet made their July ambitions clear but a higher ethylene contract price for the third quarter was looking increasingly likely as discussions progressed.

One major monomer seller reported that buyers were moving close to sellers’ ideas, suggesting that the quarterly contract, now at €1,038/tonne FD NWE, could increase by well above €100/tonne.

PE would inevitably follow any increase in third-quarter ethylene, players said.

“We sympathise with our converters,” said another major European PE producer, “but we have no choice. We can’t swallow such increases.”

PE prices were expected to remain strong in Europe but a wave of new production from the Middle East was expected to impact prices later in the year, or early 2009 at the latest.

Much depended on how demand fared in the key China market during the second half of the year, sources said.

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

($1 = €0.64)

Click here to find out more on the European polyethylene margin report
For more on PE visit ICIS chemical intelligence

To discuss issues facing the chemical industry go to ICIS connect

By: Linda Naylor
+44 20 8652 3214

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly