Dow targets €80/tonne price hike for September PE

13 August 2010 11:31  [Source: ICIS news]

LONDON (ICIS)--Dow has told customers that it intends to raise its polyethylene (PE) prices by €80/tonne ($103/tonne) in September, a company source said on Friday.

“After the holiday season the demand for PE in Europe will return to normal levels. This, combined with the influence from other regions, will result in a short balance for PE,” Dow said in a letter to its customers.

“The order intake is still very strong. There are no signals of any weakness,” said a company source, talking about the low density PE (LDPE) market.

LDPE was still considered to be the strongest PE grade, and many sources felt that there might be some room for upward movement in September, but sentiment in the high density PE (HDPE) market was different.

“I am not confident for HDPE in September,” said another producer, adding: “Fundamentals are not the same as in LDPE.”

A third producer disagreed.

Ethylene will be tight in September. I can see a situation where HDPE prices rally on the back of a higher feedstock contract price,” it said.

Speculation over the September ethylene contract price had begun on the PE market and valuations between a fall of €40/tonne and a rise of €20/tonne were mooted by PE producers. August had settled down by €18/tonne, at €940/tonne FD (free delivered) NWE (northwest Europe).

LDPE net prices were trading in a wide range in August, but an average of €1,250/tonne FD NWE was reported. HDPE prices were considerably lower.

Sources agreed that 2010 had proved to be better than they expected. The flood of material from the Middle East, which buyers had expected to use as a lever to bring prices down, had still not arrived, mainly due to delays, and production issues and cutbacks in Europe kept European pricing firm.

September was too far away for some players to consider, and holidays still affected the European market.

At present, buyers did not take Dow’s announcement entirely seriously.

“Well you have to admire them for being consistent,” said one large buyer.

However, another producer expected the market direction to become clear in the coming days.

“Buyers will start ordering for September next week,” it said, adding: “They have low stocks and they will want to ensure delivery. Let’s wait and see but I am optimistic.”

PE is used extensively in the packaging industry.

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

($1 = €0.78)

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By: Linda Naylor
+44 20 8652 3214

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