20 January 2009 13:25 [Source: ICIS news]
By Linda Naylor
LONDON (ICIS news)--LyondellBasell has stopped new orders for January on some of its commodity low density polyethylene (LDPE) grades, as prices are expected to increase next month, a company source said on Tuesday.
“We have a high number of order stops, particularly for fractional melt index material,” the source said. “We are going to start February with low stocks.”
December polyethylene (PE) demand proved to be very strong as several producers offered product at knock-down prices.
LDPE spot volumes were available to large buyers at below €600/tonne ($789/tonne) FD (free delivered) NWE (northwest ?xml:namespace>
The same reasoning brought buyers back into the market in January, leading to low producer stock levels not seen for some time in the industry.
Buyers had been working on nigh-empty inventories and were now replenishing their stock levels.
“There is no danger in buying at today’s levels,” said one medium-sized buyer who had let his stocks run dry. “Whatever the price is in February, we can’t expect it to be lower than it is now.”
Market focus was on the February ethylene now that it was clear that a quarterly monomer price would not be fixed.
“We can expect an increase in February ethylene,” said one market observer, “perhaps not as much as €100/tonne, but a decent rise.”
“We are spreading news to our customers that PE prices will probably have to increase in February, as ethylene will probably go up. We are talking not insignificant amounts,” a producer said.
Ethylene talks for February were getting under way and sellers made it clear that they needed an increase based on the high cost of naphtha, which had risen by around 30% since the January ethylene contract was settled.
Naphtha was assessed at $348-358/tonne CIF (cost and freight) NWE at midday on Tuesday.
Other PE producers were also considering hikes for February PE. There was a question mark over whether the current strong demand for PE was simply down to restocking, however.
New capacities loomed over the PE market and the global economic gloom, leading to limited credit facilities for many players, remained uppermost in PE players’ minds.
PE production remained cut back at many sites in
PE producers in
($1 = €0.76)
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