04 March 2011 10:22 [Source: ICIS news]
LONDON (ICIS)--SABIC’s 400,000 tonne/year low density polyethylene (LDPE) plant at ?xml:namespace>
“The plant came down as planned last weekend [26-27 February],” said the source.
LDPE prices were fast approaching levels not seen since July and August 2008.
Availability had been tight for many months and while this was easing with some suppliers, as buyers bought only the absolute minimum volumes and producers’ inventories eased a little, the supply/demand balance remained very much in favour of sellers.
“It doesn’t take a weather man to see which way the wind is blowing,” said a trader. “People who were walking away from my offers at the beginning of the week are coming back now.”
By mid-week, buyers began to realise that March prices were going to be higher, and a flurry of activity followed, with prices reaching former record high levels of €1,500/tonne FD (free delivered) NWE (northwest Europe).
One seller, which deals with smaller buyers, reported a sale as high as €1,600/tonne FD NWE, but this was not the norm at present.
Polyethylene (PE) producers were confident of achieving the €60/tonne increase in the ethylene contract as a minimum in March and high density PE (HDPE) sellers were seeking increases beyond this level.
“I think €100/tonne [up] will be possible. It will often depend on the starting-point too. For customers at the lower end, they will face big pressure or will not get much volume,” said an HDPE seller.
Buyers could do little in the face of the upward movement in March.
“I just won’t buy,” said one smaller PE buyer.
A major PE producer admitted that the order intake for February had been slower, and more evenly spread throughout the month than usual, as many buyers made sure that they had secured orders before placing volumes, fearful of being left with high-priced product in a market which could fall sharply.
Few large buyers were in a position to be able to walk away from the market, however.
“I will definitely have to pay the ethylene increase this month,” said a large PE buyer. “In fact I almost hope that they get more than the ethylene increase, that way we will get more imports to relieve the situation.”
The PE market has been short of imports for some while and controlled output and production issues in Europe were the main source of increases which had been passed on to the market for several months.
“We expect demand to be down with these high prices,” said another producer. “But we are entering a period of cracker maintenance and shutdowns. Crude oil is very high and doesn’t look like falling any day soon, so PE will remain high.”
LDPE would not settle fully before the end of the month, but the upward momentum was unquestionable.
PE is used in packaging, household goods and agricultural sectors.
($1 = €0.72)
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