European PE contracts firm on feedstock and tight supply

04 September 2009 23:59  [Source: ICIS news]

LONDON (ICIS news)--European low density polyethylene (LDPE) contract prices firmed by  €100/tonne ($143/tonne) in early September due to particularly tight supply, mounting ethylene feedstock pressure and signs of demand recovery versus earlier in the year, market players said on Friday.

“With the September ethylene increase and low stocks, we had no option but to increase prices,” said one producer.

“Market tightness is giving sellers the opportunity to push for more than the ethylene increase,” said one buyer.

In the context of recent and current outages both on cracker and polymer level:

“Low stocks and slightly higher demand have caught everybody off balance,” said another supplier.

Larger hikes of up to €120/tonne were reported for LDPE contract on the sell-side, but there was no buyer confirmation to substantiate this at present.

Contract prices for other polyethylene grades were also subject to upward pressure in early September for the same reasons as for LDPE, although market tightness was not as pronounced as for LDPE.

“LDPE is leading the charge, there are still big increases for linear low polyethylene (LLDPE), but it is lagging behind a bit,” said one supplier.

LLDPE contract prices were assessed higher by up to €80/tonne, in line with the ethylene movement and firmer market sentiment.

High density polyethylene (HDPE) also moved up by €80-90/tonne in early September.

Producers reported larger hikes of up to €90-100/tonne for both LLDPE and HDPE, but there was insufficient market confirmation to substantiate this at present.

One producer said it would look for more than €100/tonne during September, anticipating that cracker and polymer outages during September would keep the market tight.

Some buyers said that further upward movement was likely during September, depending on supply/demand.

Producers maintained that demand was healthy in September, after the summer holiday period. One producer said it was maximising its production, but said it could not keep pace, stating that “sales were overachieving expectation month-on-month”.

Buyers, however, described consumption as below par. “We have no alternative but to accept the increases, but our concern is that the end-market is not good,” said one large customer. Converters expressed difficulties in trying to pass on any increases downstream.

Customers were limiting and postponing purchases in September based on speculation that product from SABIC’S new LDPE unit and lower priced Middle East imports were likely to be available in October.

“There is absolutely necessary buying only in September”, said one trader.

“The cupboard is almost bare, but we expect this to ease in October with imports”, said one reseller in the UK.

In early September, LDPE GE Film prices were assessed at €1,130-1,150/tonne FD (free delivered) EU, according to global chemical market intelligence service ICIS pricing.

($1 = €0.70)

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ICIS has launched weekly pricing reports in Africa for polyethylene and polypropylene. For more information contact Nadine Spoeri

By: Heidi Finch
+44 20 8652 3214

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