Borealis targets €60/tonne price hikes for PP and PE in June

27 May 2009 11:52  [Source: ICIS news]

LONDON (ICIS news)--Plastics giant Borealis is targeting €60/tonne ($85/tonne) price hikes for polyethylene (PE) and polypropylene (PP) in June, the company said on Wednesday.

“This increase is necessary to preserve sustainable margins and to ensure our innovation programmes,” said Lorenzo Delorenzi, executive vice president polyolefins.

The announcement came soon after the initial settlement of the June monthly ethylene contract price at €705/tonne FD (free delivered) NWE (northwest Europe), an increase of €20/tonne over the May contract.

The monthly propylene contract was not settled for June, and discussions were strained.

“I don’t think demand is there to justify an increase,” said one PE market observer.

“They might get the €20/tonne from ethylene if they push really hard, but they will have a struggle getting any more,” said a large polyolefins buyer.

PE prices had slipped in May as European demand remained very weak. PP prices largely rolled over.

Low density PE (LDPE) prices eased back by €10/tonne to €890-900/tonne FD NWE on a gross monthly basis, while the spot market showed a much more nervous disposition, moving well below €800/tonne FD NWE net in May.

PP homopolymer injection prices sat around €780/tonne FD NWE, on a gross basis.

The European polymers market continued to be supported by strong export volumes.

“We have had our best month ever for exports,” said another polymer producer who would soon be deciding on the tack to take for June business.

“The last few days have been so uncertain as far as ethylene goes that we haven’t yet decided internally what we will be looking for in June. One thing is sure is that the cracker guys are struggling and we have to get prices up.”

Oil and naphtha prices have increased significantly in May, adding to producers’ costs.

Brent crude was trading above $60/bbl, while naphtha had soared to $500/tonne CIF (cost insurance freight) NWE. This was offset to an extent by the weaker dollar but few argued that producers’ costs had not risen.

In spite of these upstream increases, however, demand in Europe was weak. PP volumes were estimated by one producer to be running at minus 10% compared with 2008 and, in its turn, 2008 was weaker that 2007.

PE demand was worse, with a reduction of volumes into double digits on most grades.

Markets globally were waiting for the arrival of new capacity from the Middle East and buyers’ inventories were low in anticipation of new, keenly-priced material.

There was still little sign of offers of significant quantities at present, however, in spite of rumour and counter-rumour which left the market jittery.

“As a supplier with a foot in both Europe and the Middle East, we will do our best not to damage the European market with new volumes,” said another polymers producer.

At some point in 2009 players generally expected product to arrive in Europe and affect pricing but most admitted that that time had not yet come.

“If they manage to get increases in June, it’s on the back of production cutbacks and exports, not European demand,” said another buyer.

PP and PE producers in Europe include LyondellBasell, Borealis, SABIC, Total Petrochemicals, Dow Chemical, Repsol, INEOS Olefins and Polymers, Polychim and Domo.

($1 = €0.71)

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By: Linda Naylor
+44 20 8652 3214

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