Europe PE buyers ready for more hikes in August

31 July 2008 17:59  [Source: ICIS news]

LONDON (ICIS news)--Europe polyethylene (PE) buyers face more price rises of between €50-150/tonne ($78-156/tonne) in August, in spite of reaching record high levels in July, sources said on Thursday.

“I can’t see them letting this opportunity go by,” said one beleaguered buyer. “Hopefully August will be the end of the pain.”

PE producers had largely covered the €190/tonne ($297/tonne) increase in third-quarter ethylene in July, hiking PE prices by as much as €200/tonne in many cases.

One lone producer aimed to cover the ethylene increase in two stages, in a bid to help harassed buyers struggling under difficult economic conditions.

Low density PE (LDPE) spot was trading around €1,500/tonne FD (free delivered) NWE (northwest Europe) at the end of July.

While spot prices had already risen for August deliveries, monthly LDPE prices were in the mid-€1,500s/tonne FD NWE on a gross basis, and were widely expected to move up in August.

Producers were also approaching the market differently for August. July PE prices were settled in a wider-than-usual spread, with some buyers reporting up to €70/tonne difference between suppliers. A more normal spread would be around €20/tonne.

Linear low density PE (LLDPE) buyers were under particularly strong pressure to pay higher prices as material was tight.

SABIC would have fewer imports from the Middle East in August and September after outages at Al-Jubail, and Dow was strictly allocating LLDPE deliveries due to earlier production issues at Tarragona in Spain.

Another large PE buyer said: “They are being very hard-nosed. It has taken all my negotiating skills to persuade them not to make me pay more for my LLDPE than my LDPE,” said, the buyer who usually had a €50/tonne premium for its LDPE over LLDPE commodity grades.

Traders were becoming cautious as oil prices slipped and Asian markets faltered.

“I intend to go on holiday with empty stocks,” said one.

Export activity was muted, not only because volumes were not widely available, but also because of lower demand due to expectations of lower prices caused by the weakening oil and naphtha prices.

PE suppliers in Europe include Saudi Basic Industries Corp (SABIC), 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
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By: Linda Naylor
+44 20 8652 3214

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