Europe polyolefins await C2, C3 contracts for April price direction

25 March 2011 11:15  [Source: ICIS news]

LONDON (ICIS)--European polyethylene (PE) and polypropylene (PP) players are waiting for the settlement of the upstream ethylene (C2) and propylene monomer contracts to give some direction to April pricing, several of them said on Friday.

Dow Chemical has already made it clear it will be targeting a €50/tonne ($70/tonne) increase for April low density polyethylene (LDPE) and linear low density polyethylene (LLDPE), but several other producers have said they will wait for the monomers to settle before making plans for April public.

PE and PP prices have been rising steadily for several months. LDPE has risen by €200/tonne since the beginning of 2011, and PP prices have gone up by more than €200/tonne in the same time. Both LDPE and PP are now at record levels.

LDPE is trading at about €1,500/tonne FD (free delivered) NWE (northwest Europe), and PP homopolymer injection at around €1,400/tonne FD NWE.

High density polyethylene (HDPE) is not at a record high but prices have soared in the past three months. HDPE blowmoulding was trading at €1,190/tonne FD NWE on a gross basis at the end of December, but has risen by almost €250/tonne in 2011 to €1,435/tonne, subject to discounts.

Some buyers expect producers to push higher again in April to improve margins. High prices have started to affect demand and credit availability has been a problem at many small and medium-sized accounts in particular.

“Prices have soared while credit lines have remained the same,” one producer said. “This is bound to have an effect on demand.”

Many larger buyers have been able to pass on some of the recent increases to their markets but there has been a time lag, they said. Some voiced concern over when prices would inevitably fall. Several also said they were cutting back production to avoid building up inventory.

“We are trying to work out how we can cut back output,” one PP converter said. “We need stocks to be able to serve our customers, but we are looking at closing lines at the weekend,” they added.

A PE buyer said it was only taking new orders where it had “already negotiated the increase”.

European prices have risen so sharply that buyers are receiving offers of re-exported material from China, where prices have been flat. Prices have been too high to work, mainly because of the long lead time between Asia and Europe, and offers have not been low enough to attract many buyers.

“It needs to be really tasty to make it attractive,” one trader said.

HDPE injection has been heard as offered at €1,250/tonne DDP (delivered duty paid) for arrival end May, while current spot levels are at €1,350/tonne FD NWE.

These offers are not expected to affect April pricing in Europe but some sources feel they may have a dampening effect by May.

However, most players hesitate to make predictions in these markets as, for many months, an expected price fall has failed to materialise.

Delays at new capacities in the Middle East have disappointed European buyers, while producers have managed to shift output towards specialties in a move to cope with commodities arriving from the Middle East.

Political tensions and violence in the Middle East and potential demand from Japan following the March 11 disaster, also come into the equation, leaving most sources cautious in their approach to buying and selling.

PE is used extensively in household goods, packaging and agricultural sectors.

($1 = €0.71)

For more on polyethylene, visit ICIS company intelligence

By: Linda Naylor
+44 20 8652 3214

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