Europe PE prices spike on higher feedstock costs

10 January 2011 12:37  [Source: ICIS news]

LONDON (ICIS)--Polyethylene (PE) buyers in Europe face hefty price increases in January, up to €120-130/tonne ($154-167/tonne) from last month, as producers force through higher prices on all PE grades following the rise in feedstock costs, market sources said on Monday.

“It looks like [producers] are going to stick to it this time,” said a large polyolefins buyer.

Another large buyer said: “I can’t see the slightest chink at the moment,” referring to European producers’ approach of targeting the full €105/tonne increase in the price of ethylene in January; in most cases, producers have targeted more than this.

Buyers with some stock in hand were waiting in the hope that producers would soften their approach as the month progressed. Those who had to buy product had little chance of avoiding higher prices.

“I sold LDPE at €1,450/tonne this week. The same buyer paid barely above €1,300/tonne at the beginning of December,” said one trader, reporting its low density PE price on a free delivered (FD) Germany, net basis.

A full picture for Europe was not yet clear for January, as some regions, particularly those in southern Europe, were only getting back to business on Monday. Sources in northern Europe said business was at higher pricing levels amid a grim mood for buyers.

“It is going to be difficult to get these increases back from our markets,” said another buyer.

Producers, on the other hand, were in buoyant mood.

“Early signs are very encouraging,” said a producer. “We have already closed 60% of orders for the month and all prices have gone up by a minimum of €120/tonne.”

With some high density PE (HDPE) film business in December at €1,120/tonne FD NWE (northwest Europe) on a gross basis, in January this would amount to a 10% increase for some buyers if producers were to achieve their price targets.

The HDPE market had changed significantly since the early part of the fourth quarter, when net HDPE levels had been barely above the price of ethylene. But careful production controls by producers and a lack of imports to support the market meant that this sector had firmed considerably.

“I see HDPE as the tightest PE grade at the moment,” said a major HDPE producer.

Buyers agreed that there was little they could do if they wanted the product.

“If I want what I need, I am going to have to pay the price,” said a large HDPE buyer. “There is no room for negotiation at the moment.”

Some producers were already warning the market of further price increases in February, as crude oil and naphtha prices continued to exert pressure on naphtha cracker margins.

One producer sounded a note of caution, however.

“We are targeting the ethylene increase [€105/tonne] and no more. The economic recovery is fragile and we don’t want to kill our customers,” it said.

PE is primarily used to make film for the packaging and agricultural sectors, as well as in the manufacture of household goods.

($1 = €0.78)

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By: Linda Naylor
+44 20 8652 3214

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