06 May 2010 17:30 [Source: ICIS news]
LONDON (ICIS news)--European polyethylene (PE) pipe grade resin May contract prices climbed by €5-10/tonne ($6-13/tonne) on shorter availability and strengthening demand despite stability upstream, market participants said on Thursday.
Black high density PE (HPDE) 100 registered increases of €10/tonne, leaving prices at €1,210-1,260/tonne FD (free delivered) NWE (northwest Europe), according to data from global chemical market intelligence service ICIS pricing.
Meanwhile, black HDPE 80 values narrowed slightly to €1,230-1,270/tonne FD NWE, as a number of players felt it was not yet possible to implement hikes above €5/tonne for high end business.
Several buyers conceded prices could trend higher still as the month wore on. This was attributed to a number of ongoing production constraints, the absence of US sellers in the wider market – which continued to create good export opportunities for European suppliers – and the strengthening demand for pipes within Europe as the construction sector entered its peak season.
However, these bullish factors were still not enough to enable producers to reach their initial targets of plus €50/tonne in May, a number of sellers and buyers said.
One producer said it expected prices to have gained €30/tonne by the end of the month, but for the main part, both buyers and sellers expected increases ranging between €10-25/tonne.
“The final outcome [of negotiations] will depend on how demand performs [throughout the month], the starting point of negotiations as there are still some big consumers getting material slightly under €1,200/tonne, and the buyer size and location,” noted a major pipe converter.
This was echoed by a supplier, which reported it had sold some quantities of black HDPE 100 resin at around €1,250/tonne FD Germany and France with very little negotiation.
“A few suppliers are dangerously close to allocation and demand is getting better day by day. Producers have good arguments to increase prices in May, but I do not think they will be able to reach [the plus] €50/tonne they have announced – they will probably meet in the middle,” the supplier said.
However, a number of pipe converters rejected these calls for higher prices, pointing to stability in the upstream ethylene market and describing the market as well balanced.
One major French pipe converter noted: “There is a lot of off-spec material in the market, and at least one supplier is expected to soften [prices] this month by €10-20/tonne as a result.”
A second consumer also noted sliding ethylene prices in the US would reopen the export arbitrage into several countries, where in recent months demand for product had been satisfied by European sellers, who will now face increased competition in these export markets.
The consumer explained: “The market will turn at the end of May or beginning of June as production constraints [in both the PE pipe and upstream ethylene market] will be resolved and there will be too much material as we enter the slower summer season.”
($1 = €0.78)
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