28 February 2011 17:45 [Source: ICIS news]
LONDON (ICIS)--INEOS plans to target price increases of up to €110/tonne ($151/tonne) for its polyethylene (PE) sales next month after the initial March ethylene contract settled at €1,195/tonne, up by €60/tonne from February, sources at the company said on Monday.
“The market is very, very tight and margins remain very thin. Therefore, we see strong justification for a large price increase,” said an INEOS source with knowledge of high density PE (HDPE) production.
HDPE margins had been very poor in the fourth quarter of 2010. While they were still not considered to be very strong, margins improved as availability had been hampered by unplanned production problems and a lack of imports.
Two cases of force majeure were in place for INEOS's HDPE supplies in Europe.
HDPE blowmoulding spot prices had risen above €1,300/tonne FD (free delivered) NWE (northwest Europe) by the end of February, compared with below €1,000/tonne FD NWE at the end of October 2010.
INEOS aimed to increase HDPE prices by €110/tonne in March, while its targets for low density PE (LDPE) and linear low density PE (LLDPE) were at plus €80/tonne, a source said.
European cracker margins based on naphtha feedstock fell by a massive 30% in the week ending 25 February because of strong upstream gains driven by the continuing unrest in the Middle East, data analysed by ICIS showed on Monday.
LDPE prices were currently at around €1,450/tonne FD NWE on a net basis.
Brent crude prices had reached a two-year high of $119/bbl briefly in February. At 17:00 GMT on Monday, April Brent crude was trading at $112.37/bbl, up $0.23/bbl.
Buyers were becoming increasingly frustrated by the relentless round of price hikes in polymers markets, and several producers admitted that credit was now a real problem.
“Their polymer prices have gone up by as much as 30% in past months,” said one producer, “but credit lines have not budged.”
Some sources recognised a situation that they had experienced in 2008, when it looked as though prices could only go up before eventually crashing throughout the fourth quarter.
Producers countered that inventory levels were not high enough for this to happen at this point in 2011, and unrest in the Middle East was strengthening sentiment in the crude oil market.
PE is used in packaging, household goods and agricultural sectors.
The initial March ethylene contract was settled on a free delivered (FD) northwest Europe (NWE) basis.
($1 = €0.73)
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