Europe HDPE surges on tight availability, higher feedstocks

14 February 2011 11:31  [Source: ICIS news]

LONDON (ICIS)--High density polyethylene (HDPE) prices, long seen as the laggard in the general polyethylene (PE) upward trend, have surged over the past few weeks, sources said on Monday.

Although prices have recovered sharply, they still had some way to go before reaching the former record high level of July 2008. 

Net HDPE prices slumped from a high of €1,420/tonne ($1,919/tonne) FD (free delivered) NWE (northwest Europe) in the third quarter of 2008, to a low of €655/tonne at the end of the year.

Current net levels were now at €1,240-1,300/tonne, depending on the size of the customer, but there were few bargains to be had.

“I have had to pay €1,250/tonne FD NWE for extra volumes,” said a large injection buyer, whose net price had been €980/tonne FD NWE in October 2010.
HDPE blowmoulding buyers reported a similar picture.
Both HDPE blowmoulding and injection grades were particularly strong in February, but buying sources felt the current market strength was based more on reduced output than strong demand. They were nevertheless forced to pay higher prices.
Two recent cases of force majeure on HDPE, from INEOS at Lavera, France and Lillo, Belgium, coupled with producers switching from HDPE to linear low density PE (LLDPE) at swing plants.

One major producer felt that the current tight situation would last for several months. “I can’t see availability improving before August,” it said.
Buyers had been expecting relief in the form of imports from new capacities in the Middle East for many months, but delays meant that demand, particularly in fast-growing areas like China and India, had had time to catch up with output and Europe was short of imports to support the tight market.
PE producers were also expected to target more increases in March as they envisaged another rise in the new ethylene momomer contract price.
“We will recover anything we get on monomer,” said another HDPE producer.
One producer added a note of caution, however, not just for HDPE but for all PE grades.
“Demand is good, price is not an issue, but everybody is concerned. It is not a happy feeling,” it said. “We are pushing hard, but we have to because raw material prices are high, but nobody is happy.”
Several buyers envisaged a similar situation to the fourth quarter of 2008 when prices collapsed along with crude oil levels, but producers argued that the situation was not the same. Inventories had been high then, whereas now they were low.
Brent crude oil was trading at over $100/bbl on Monday and there was no expectation of an imminent price crash at present.

HDPE blowmoulding is used widely in the manufacture of small bottles. HDPE injection is used for small household goods amongst other applications.

($1 = €0.74)

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By: Linda Naylor
+44 20 8652 3214

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