FocusEurope PE buyers face price hikes for fifth month in a row

17 May 2010 13:17  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS news)--European polyethylene (PE) buyers are faced with yet more price rises in May - the fifth consecutive month - particularly for low density PE (LDPE) and linear low density PE (LLDPE) grades, market sources said on Monday.

“We are getting increases in May, and we will almost certainly see more increases next month,” said one LDPE seller. “Product is very tight.”

A major producer said: “We are selling everything we can make,” adding that LDPE was "very strong".

A buyer who settles LDPE business on a retroactive basis said: “I will wait until the last day [of May] before I settle, but at the moment it looks like more than €20/tonne ($25/tonne) higher than April,” .

Inventories along the chain were very low. Buyers had been buying on a hand-to-mouth basis for several months as they expected new capacities to affect pricing globally, but European producers had also been controlling production carefully. Any production hiccups were affecting supply, such as the outage of LyondellBasell’s 320,000 tonne/year LDPE plant in Aubette, France, last week.

Demand for LDPE had rallied in the second quarter of 2010 after a poor start to the year, and growth was now showing a positive tendency compared to last year.

PE output had been cut back for many months in 2009 and early 2010 due to poor demand in difficult economic circumstances and in anticipation of new capacities coming on stream in the Middle East and Asia. Many of these capacities had suffered long delays, however, and large scale plants in particular had been affected by technical issues.

LDPE was in particularly short supply due to permanent closures at LyondellBasell sites in the UK and France; at Total Petrochemical sites in France; and at a SABIC site in the Netherlands.

The status of the Netherlands site was not clear, as the 120,000 tonne/year LDPE Geleen units were due for closure after the successful start-up of SABIC’s new 400,000 tonne/year LDPE plant at Wilton in the UK. The status of this plant was not confirmed by the company, but market sources reported a slow start-up with many production hiccups.

LLDPE was also tight elsewhere in Europe. Expected imported volumes had not materialised and the availability of co-monomer needed to manufacture LLDPE grades was said by some producers to be affecting output.

In mid-May, LDPE net prices were trading around €1,250/tonne FD (free delivered) NWE (northwest Europe), with some sales below and above this level. End of December LDPE net prices had been at €980/tonne FD NWE and PE buyers had been faced with increases for five consecutive months, with sellers already talking further hikes for June.

“We have done the first LDPE sales for June,” said one major PE producer, “at €20-30/tonne more than in May.”

Dow closed its order books for May LDPE and LLDPE last week, due to strong demand and tight availability.

Higher ethylene prices were leading PE producers to expect a higher monomer contract price for June, after the rollover in the May contract price, at €960/tonne FD NWE.

Crude oil and naphtha prices continued to fall, however, and PE buyers expressed some anger at the intransigent position shown by producers.

“May ethylene was stable, and we are paying increases. Oil is falling and Asia is looking weaker. This doesn’t make sense,” said one buyer.

Product availability was tight, however, and the local supply/demand situation in Europe was in favour of suppliers at present.

Even high density PE (HDPE) prices were showing no signs of weakness, as producers had managed to export volumes and switch to LLDPE production in some cases. Imported material was not offered in sufficiently significant volumes to affect pricing from European producers, sources agreed.

Market sources generally expected PE pricing to be affected by imported product from new capacities in Asia and the Middle East by the second half of 2010, but for the moment there was no sign of local producers offering lower prices in May or June.

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

($1 = €0.81)

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By: Linda Naylor
+44 20 8652 3214

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