20 April 2011 13:22 [Source: ICIS news]
LONDON (ICIS)--Dow Chemical aims to increase polyethylene (PE) prices in Europe, the Middle East and Africa by €100/tonne ($143/tonne) in May, based on higher crude and naphtha costs, in spite of hefty price hikes accepted by converters throughout this year, a company source said on Wednesday.
“We have been faced with persistent cost increases,” said the source, “and we need a buffer for volatility during the month.”
Crude oil and naphtha prices have risen sharply in US dollar terms since the April ethylene contract was settled, but the weakness of the American currency has led to less of a sharp rise in upstream costs in euro terms.
Volatility in crude and naphtha prices, as well as exchange rates, has been high throughout the month.
Brent crude was trading at $122.78/bbl on Wednesday morning, while naphtha was at $1,086–1,076/tonne CIF (cost, insurance and freight) NWE (northwest Europe).
On 28 March, the date on which the April ethylene contract settled, Brent crude was at $116.25/bbl and the naphtha range for the week ending 1 April was at $1,019–1,027/tonne CIF NWE.
The US dollar/euro exchange rate for the end of March was $1 to €0.71, while on Wednesday it is $1 to €0.70.
The April ethylene contract settled at €1,205/tonne FD (free delivered) NWE, up by €10/tonne from the March contract price.
PE buyers have complained of the constant round of price increases that they have faced for many months.
“Our PE price goes up while the price of our finished film goes down,” said one large film producer, who said that imports of finished film forced it to lower its own price, in spite of higher production costs.
Many PE buyers said they expect to be able to buy at lower prices in May, rather than the plus €100/tonne now proposed by Dow.
Imports of high density polyethylene (HDPE), in the form of re-exports via the Middle East from China, are expected to arrive imminently, and buyers said they do not expect to be paying higher prices to European producers against this backdrop.
Linear low density polyethylene (LLDPE) buyers face no shortage of product, and they said they expect either a rollover or a slight decrease in May prices.
Low density polyethylene (LDPE) buyers are now beginning to expect some relief from many producers' short stock position, as production problems have been resolved. LDPE buyers also said they are hopeful of lower prices in May.
May PE negotiations are not expected to begin until well into the next month, and most PE producers are holding back pricing ideas until the May ethylene contract price settles. Early indications for this are for a rollover to a limited increase. But with upstream volatility high, price ideas are liable to change at short notice.
PE is used extensively in packaging, household goods and agricultural industries.
($1 = €0.70)
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections