Record high polymer prices in Europe stifle demand

14 March 2011 12:07  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS)--High polyolefins prices in Europe - in many cases record highs - are taking their toll on demand as prices soar but credit lines remain static, sources said on Monday.

“Credit lines aren’t going up in line with prices,” said a major polyethylene (PE) producer. “There are escalating polymer prices everywhere, but no flexibility in credit lines.”

Buyers were very cautious when it came to placing volumes, and many thought the top of the current cycle had been reached.

“I will do my best to reduce production,” said a medium-sized buyer. “We plan to stop running the lines at weekends. We can’t stop altogether because orders often come in with just 48 hours’ notice, so we need some stock, but it’s crazy to build up too much stock of end product at these prices.”

Polypropylene (PP) net homopolymer injection prices were now at €1,380/tonne ($1,917/tonne) FD (free delivered) NWE (northwest Europe), higher than their level of €1,255/tonne when Brent crude traded briefly at its record high of $147/bbl in summer 2008.

Low density PE (LDPE) prices were just a few euros short of the record high of 2008, when prices broke the €1,500/tonne FD NWE barrier on a net basis.

High density PE (HDPE) prices still fell short of record high levels, but production had been cut back over recent weeks and prices had risen sharply in the first quarter of 2011.

Converters’ buying patterns changed as they only bought what they knew they could sell on at a higher price.

“We have only got in about 75% of the PE orders we expected for March so far,” said a distributor. “Having said that, we don’t have much product though.”

“People are only buying what they really need,” said another producer. “Orders are more evenly spread throughout the month. They arrive day by day at the moment.”

An importer said: “I’ve not sold all my material [PE] yet for March,” adding: “But I’m not worried. It will all be gone by the end of the month.”

Another seller of imported material said: “People are very nervous about buying too much at the peak and credit has an impact as well.”

Imports were still not having a major impact in Europe, however, and demand had had time to catch up with new, often delayed, capacities.

Some players felt that the current high prices could not last.

“You have to make money while you can,” said a pragmatic producer, but not all agreed that the current market was about to change.

“Smaller buyers might be cutting back, but large ones are still ordering and can’t get enough [PE],” said another producer.

“There is a crisis in shipping. There simply aren’t enough vessels to move product from the Middle East out. We have had our best month ever and even now we are preparing a bumper July.”

In March, polymers buyers had been faced with hefty hikes and most had paid them if they wanted to secure material, but the majority also still expected to be able to get hold of cheaper imports in the near future as European prices continued to climb.

PE and PP are used in packaging, the manufacture of household goods, and in the agricultural and automotive sectors.

($1 = €0.72)

For more on polyethylene, polypropylene visit ICIS chemical intelligence

By: Linda Naylor
+44 20 8652 3214

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