Europe PE sellers pushing to recover costs

17 July 2008 15:44  [Source: ICIS news]

LONDON (ICIS news)--Europe polyethylene (PE) buyers are paying unprecedented increases of around €200/tonne ($317/tonne) for their July product as producers try to pass through higher feedstock and energy costs, market sources said on Thursday.

“We have paid an increase of €200/tonne from SABIC,” said one large PE buyer. "We had no choice. It was plus €200/tonne or nothing."

Added one UK buyer: “We had paid increases of up to €200/tonne on the continent,” he said, “but we have been faced with hikes of more than £200/tonne [€252/tonne] for some grades of LLDPE [linear low density PE] in the UK.”

Similar increases was confirmed on a widespread basis as beleaguered buyers attempted to procure material.

PE producers were already targeting yet higher prices for August, with Dow the first to publicly announce a new hike of plus €150/tonne for business next month.

Other producers confirmed that they would also be seeking higher prices in August.

Low density PE (LDPE) spot was higher than for regular monthly business and approaching €1,500/tonne FD (free delivered) NWE (northwest Europe) on a net basis mid-July.

One spot seller said he had hardly anything to sell. “I had two lots of LDPE that went within seconds of me offering them,” he said.

Converters feared long-term growth of the PE market would be affected by the record highs.

“We really have to fight with our customers to get anything back. It is very hard,” said another PE buyer.

“They have got carried away with it. There is no need for more hikes. We have already covered the ethylene increase of Q3,” said another buyer.

In spite of complaints from buyers, they admitted that they had no option but to accept higher prices if they wanted to get hold of material.

Several buyers did not expect the situation to ease significantly until the first quarter of 2009, when new capacity from the Middle East would be fully on stream.

“More PE will come to Europe than we had earlier expected,” said a PE buyer. “China has to be affected by weaker European and US demand at some point and the material will have to be diverted to Europe.”

PE is used mainly in packaging, much of it going into the food-packaging industry. Suppliers in Europe include SABIC (Saudi Basic Industries Corp), LyondellBasell, Borealis, Polimeri Europa, Dow, Repsol, Total Petrochemicals and INEOS Polyolefins.

($1 = €0.63)

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

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By: Linda Naylor
+44 20 8652 3214

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