Europe polyolefin producers have mixed outlook for August pricing

28 July 2010 16:38  [Source: ICIS news]

LONDON (ICIS)--Polyolefin producers in Europe have announced wide-ranging plans for their August pricing after the 27 July ethylene and propylene monomer contract settlements, market sources said on Wednesday.

Not all producers were available for comment, but ideas differed between a straight transfer of the price reductions seen upstream and increases for business next month.

Both ethylene and propylene August monomer contracts settled at €940/tonne ($1,221/tonne) FD (free delivered) NWE (northwest Europe), representing a month-on-month decrease of €18/tonne for ethylene and €38/tonne for propylene.

One major polypropylene (PP) producer said it expects to give the full decrease back to the market.

“Whatever we get on propylene will go to PP pricing,” it said.

Another PP producer said: “Based on supply and demand and industry stocks as we see them, we will reduce PP prices by €25/tonne in August.”

A decrease of €20/tonne was raised by a third PP producer, while a fourth major PP producer said it would target a “strong rollover” next month.

Buyers had been expecting a sharp decrease in August after some stability in July, which left net homopolymer injection prices around the €1,200/tonne FD mark in much of Europe.

However, several buyers admitted that material was still tight.

“It’s true that availability has eased,” said one large buyer, “but we have had supply problems for a few weeks now and have sometimes had to pay high spot prices to get all we need.”

Polyethylene (PE) producers also had different views on August pricing, and there was even some confusion over where July prices were landing.

Some low density PE (LDPE) sellers reported a small increase in July, with gross LDPE levels, subject to discount, talked as high as €1,400/tonne FD NWE.

There was talk of spot LDPE from a new plant available well below this, in the high €1,100s/tonne FD in some parts of Europe, but reports were not consistent and differentials of as much as €50/tonne could be heard in some markets, depending on the position of the source.

Some PE producers said that they aimed to roll August pricing over from July, but they admitted that this would be difficult to do in the high density PE (HDPE) sector.

One major producer said there was room for upward movement in the low density PE market, where availability had been tight and prices firm. This was a minority view, however, and most buyers said they expect to be able to achieve lower pricing in August.

“The spread [between ethylene and PE] is satisfactory and the pressure from the market for some relief is strong,” said a major PE producer.

One LDPE seller did not agree.

“September will see another increase, so we will go for a rollover to increase in August,” it said.

Another market observer said: “Lower prices look likely in August, but there isn’t much room for a price crash. Inventories are low and feedstocks are high. We haven’t seen imported material and now Asia is looking up.”

Discussions were not expected to begin in earnest before next week.

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

($1 = €0.77)

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By: Linda Naylor
+44 20 8652 3214

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