Europe PE/PP sellers target big hikes for Feb

27 January 2010 17:47  [Source: ICIS news]

LONDON (ICIS news)--Polyethylene (PE) and polypropylene (PP) producers in Europe are looking for hefty increases of €100-130/tonne ($141-183/tonne) in February, to recover the hikes in the February monomer contracts, and  also to improve their margins in a tight market, several said on Wednesday.

“PE producers made a loss in January,” said one major producer who planned to increase prices by €100/tonne. “Low density (LDPE) in particular is tight. We have very strong requests for more material.”

“PP is tight and costs are high. We should be able to increase prices by €100/tonne in February,” said a PP producer.

Increases in upstream monomer contracts had been widely expected but the magnitude of the hikes surprised many players.

Both ethylene and propylene monthly contracts were settled for February on Tuesday 26 January. Ethylene increased by €70/tonne, to €940/tonne FD (free delivered) NWE (northwest Europe), and propylene rose by €85/tonne, to €875/tonne FD NWE.

Net LDPE prices in Europe were trading at €1,040-1,080/tonne FD in the middle of January, up by €80/tonne from December levels; PP homopolymer injection net levels were reported at €940-980/tonne FD NWE, up by €50-70/tonne from December.

Prices had increased on tight availability, as naphtha crackers ran at reduced rates.

Demand for LDPE and linear low density PE (LLDPE) was healthy, agreed sources, but opinions differed when it came to demand for PP and high density PE (HDPE).

“Customers don’t give the order until the very last minute, until they have their own order secured,” reported one spot PP seller. “Then they want the material within six hours.”

Spot prices were reported in a wide range, with business done almost on a case by case basis.

“I have sold LDPE at €1,070/tonne and €1,100/tonne FD this week,” said another spot seller. “The market is like a random painting with no pattern: it’s more Pollock than Mondrian.”

Another spot seller agreed: “The market is irrational. Crude oil and naphtha are going down and ethylene and propylene are going up. But as Keynes said: ‘The market can remain irrational longer than you can remain solvent’.”

Buyers were not happy with the current trend but several acknowledged that they had little choice but to accept increases again in February. They were prepared to put up some resistance, however.

“Increases will be very hard to pass on,” said a large polyolefins buyer. “We are going to lose a heck of a lot of money and we have scope to reduce announced increases. I will be looking to pay no more than the monomer increases.”

Polyolefins producers had put a brake on selling activities during the second half of January as it became clear that February prices would increase, so buyers had not had the chance to build up stock.

February discussions were expected to get under way in the coming days.

PE producers in Europe include LyondellBasell, Borealis, SABIC, Total Petrochemicals, Polimeri Europa, Dow Chemical, Repsol, and INEOS Olefins and Polymers.

($1 = €0.71)

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By: Linda Naylor
+44 20 8652 3214

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