Dow Chemical stops all new orders for Europe December LLDPE

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LONDON (ICIS)--Dow Chemical has stopped all fresh orders in Europe for linear low density polyethylene (LLDPE) for December, a company source said on Tuesday.

“We are seeing a very strong December and put an order-stop on new sales yesterday (13 December),” said the source.

Sales of polyethylene (PE) last month were also very strong, according to several sources with access to sales data. For many producers, November was the best month for sales in 2010, although LLDPE volumes this year have not been running higher than 2009.

LLDPE prices in December were increasing by about €30/tonne ($40/tonne) compared with November.

Dow Chemical is the leading C8 LLDPE manufacturer in Europe.

It was not clear whether the strong demand for PE in December was a result of improved downstream demand, or whether converters bought extra volumes for stock, as a buffer against higher prices in January.

The ethylene contract for January was widely expected to rise by a hefty amount, as crude oil and naphtha prices rose and the euro continued to weaken against the US dollar.

Producers were expected to recover any increase in the ethylene contract price in higher PE prices in January.

The December ethylene monomer contract price rose by €27/tonne from November to €1,005/tonne FD NWE.

“Our costs have increased by well over €200/tonne in quarter four,” said a producer, referring to the increase in crude oil and naphtha in the last quarter of 2010, “and PE prices have not caught up with that.”

Brent crude was trading on Tuesday above $90/bbl.

Some PE grades enjoyed better margins than others, with low density PE (LDPE) showing a high spread above ethylene.

High density PE (HDPE) had been weak, and at the beginning of the quarter net HDPE prices had been barely above the ethylene contract price.

Market sources, on both the buying and selling sides, said they expect the strong PE market to continue into January.

LLDPE is widely used in the manufacture of stretch film for packaging.

($1 = €0.75)

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