UK PE buyers face hefty hikes in November due to weak pound

04 November 2010 15:43  [Source: ICIS news]

LONDON (ICIS)--Polyethylene (PE) buyers in the UK are under very heavy pressure to accept significant price rises this month as the weakness of the pound against the euro has left prices well below those in mainland Europe, market sources said on Thursday.

The pound sterling was currently trading at £1.14 against the euro, while three months ago its value was at £1.21.

“I will count myself lucky if we can get away with a £50/tonne (€57/tonne) increase this month,” said one large buyer.

UK buyers were coy about giving actual price levels, but the difference between UK low density PE (LDPE) prices and those in mainland Europe were said to be as much as €90/tonne at the end of October.

The balance had begun to be redressed as November business got under way, but there was still a way to go, said some major producers.

Net LDPE prices were currently trading around €1,250-1,270/tonne FD (free delivered) NWE (northwest Europe) in mainland Europe, while the UK lagged behind significantly.

“We will simply not deliver to the UK at these prices,” said one producer.

Another said: “We have to do something. Converters on the continent are complaining of cheap imports from the UK. It’s plus £40/tonne or we don’t sell.”

LDPE was the grade where the differentials were most pronounced, and where sellers were more likely to succeed in increasing prices. Availability was tight and demand was good.

Year-to-date figures for LDPE were very healthy, unlike its sister grade, linear low density PE (LLDPE), which was showing a decrease compared to 2009 figures. LDPE growth, however, was running at an astonishing 8% over 2009 in Europe.

LDPE producers were confident of a strong end to the year as few imported volumes would make their way into Europe, while LLDPE sellers feared that the end of the year could lead to price erosion.

($1 = €0.71)

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By: Linda Naylor
+44 20 8652 3214

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