Europe PE buyers react angrily to hikes on stable ethylene

22 April 2010 12:39  [Source: ICIS news]

LONDON (ICIS news)--European polyethylene (PE) buyers on Thursday reacted angrily to higher price targets from producers in May, as the first ethylene contract for that month settled at a rollover from April.

“We are really getting sick of these increases,” said one major buyer, which reported having accepted as much as €260/tonne ($347/tonne), or more than 30%, in hikes in 2010.

Low density PE (LDPE) net prices were reported at €1,220-1,250/tonne FD (free delivered) NWE (northwest Europe).

Producers were now announcing increases of €50-70/tonne for LDPE in May, with high density PE (HDPE) sellers seeking a more modest target of plus €30-50/tonne.

“How can they justify this increase?” asked another buyer.

Several PE producers conceded that cracker margins were good, but they cited a tight supply/demand situation in support of their planned increases.

“Cracker margins are now decent, but in the last 18 months we have lost our shirt,” said a major PE producer.

“Product is tight. Prices can go up,” said another.

LDPE availability was tight, after some permanent closures in Europe and delays in new plants starting up, while HDPE availability had eased and sources expected limited movement in May.

“I don’t expect more than a €10/tonne increase in May LDPE now that ethylene has rolled over,” said a buyer.

“I think we have seen the top for PE now,” said another.

Producers intended to raise prices in May, however, and had a clear field, with no significant imports and limited availability themselves. Several sources said that prices had risen on reduced availability rather than strong demand.

“It’s not a strong market but product is tight,” said another producer.

May PE negotiations were expected to be more difficult than those of late, when producers were able to push through increases fairly easily.

LDPE sellers were not concerned about the short-term future, as no substantial quantities of LDPE would be available from new capacities in the Middle East, but linear low density PE (LLDPE) and HDPE quantities were expected to affect PE markets globally some time in 2010.

Several large PE buyers were concerned that the persistent increases would damage their markets.

“This is getting to the stage where our markets will be damaged. Monthly ethylene has left the whole market second-guessing. When it [the ethylene contract] was quarterly, we had time to recover,” said one of the buyers.

Another complained that a major contract had been lost as a packaging manufacturer reversed a decision to change from paper to plastics, due to the volatility in the plastics markets.

LDPE is used mainly in the film packaging sector, while HDPE is used for film, bottles and caps, and small injected plastic items, depending on the grade.

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

($1 = €0.75)

For more on PE visit ICIS chemical intelligence
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By: Linda Naylor
+44 20 8652 3214

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