Europe PE pipe makers target Feb prices above ethylene increase

27 January 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--A growing number of European polyethylene (PE) pipe grade resin producers have begun to nominate increases above the ethylene settlement for February, citing the need to recoup losses made in the final months of 2010 and firm margins, sources said on Thursday.

Although ethylene gained €25/tonne ($34/tonne) in February, leaving contracts at €1,135/tonne FD (free delivered) NWE (northwest Europe), at least one high density PE (HDPE) pipe grade resin producer has already said that it would look to target hikes of around €80/tonne in the coming month, although this figure could yet change depending on the supply/demand balance, the source added.

The producer speculated that manufacturers would largely be aiming to raise prices by at least €60/tonne, and that targets of up to €100/tonne could be a possibility given the pressure on PE pipe margins.

Meanwhile, a second seller was contemplating increases of €50/tonne, but was quick to highlight that it was starting from a higher price level.

Others had yet to indicate any clear pricing ideas for February. However, there was a general expectation that targets would eclipse the ethylene movement significantly. The need to improve margins was echoed by all manufacturers canvassed.

“The €100-110/tonne we gained in January did not improve our margins; it was just a transfer of the ethylene cost increase,” one producer said. “We need to recover the margin lost at the end of 2010, when it was not possible to pass the ethylene increase of €20-40/tonne down to consumers because of slow demand.”

However, the prospect of another significant hike was too much for a number of pipe converters, who termed price ideas above €25/tonne bullish given the ethylene movement and balanced supply and demand.

Most argued that lacklustre demand and ample availability would not support sellers in their aims. One large pipe converter reported that there were already some aggressive offers, particularly from the Mediterranean, heard in the market.

Another large converter said that it was “confident that we can achieve stable prices this month. Orders have already been accepted [by producers] to avoid the ethylene increase, so our next round of negotiations will be in March”.

While this expectation of steady prices did not find much support in the market, at least one seller conceded that targets could once again be undermined by ample availability and some undercutting, as demand for pipes was traditionally weak in February. 

However, the outlook for 2011 was not altogether gloomy. One producer commented: “We are hoping for a significant improvement in 2011. We expect some growth in demand as the major economies continue to grow.”

($1 = €0.73)

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By: Stephanie Wilson
+44 20 8652 3214

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