UK PE buyers fear currency-based hikes

07 January 2009 17:49  [Source: ICIS news]

LONDON (ICIS news)--UK polyethylene (PE) buyers were faced with January increases based on the weak pound sterling, several said on Wednesday.

Business was still quiet as players returned from holidays, but a large buyer expected to be paying hefty hikes this month.

“They are clearly after more money. Some are talking of increases of £120/tonne (€133/tonne). That will never happen, but I can see us paying something this month, even if prices stay stable in Europe,” he said.

Another was not so sure, but reported upward pressure on low density polyethylene (LDPE) in particular.

“They are asking for increases but I think it’s just to stop prices going down again,” he said, also admitting that some grades of LDPE were becoming short due to production cutbacks.

The pound sterling saw record lows against the euro in December and early January, falling close to parity, but it had rallied to €1.11 on Wednesday afternoon.

“We will be keeping a very close eye on the currency movements before we settle anything,” said the buyer.

A trader reported some business already at higher levels for January.

“I sold some LDPE well above £600/tonne FD this week to a buyer that was paying in the mid-£500s/tonne FD in December,” he reported.

Much business was already discussed on a euro basis, which meant that prices would automatically increase in line with the currency fluctuations.

“Our policy in the UK will be the same as everywhere else,” said a major PE producer. “We will be looking to firm prices up everywhere to the same level.”

It was so far unclear where January prices would land. One major producer was looking for a firm rollover at €720-750/tonne FD NWE for LDPE. Others were talking about increases of €50-80/tonne for January business.

Discussions were expected to be protracted.

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

($1 = €0.74)

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By: Linda Naylor
+44 20 8652 3214

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