Europe PE producers target higher August prices

03 August 2011 14:54  [Source: ICIS news]

LONDON (ICIS)--A growing number of European polyethylene (PE) producers are following Dow Chemical’s lead in targeting significant hikes in August, with initial nominations of plus €50–100/tonne ($71–143/tonne) heard in the market on Wednesday.

At least four producers have already outlined plans to raise prices by a minimum of €50/tonne in August, citing the need to cover the €30/tonne ethylene increase and some margin besides, which would recoup some of the losses made over May to July, when domestic market prices lost as much as €130–250/tonne depending on the grade, according to ICIS data.

Producers said that with China now showing strong signs of recovery and imports into Europe falling – particularly of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) – a change in trend is imminent.

“We will target hikes rather than volumes,” said a producer. “We don’t have much stock so are under no pressure to sell. We will target plus €100/tonne on LDPE [low density polyethylene], €80/tonne on HDPE and €50–80/tonne on LLDPE.”

This is already apparent in the spot market, where a stabilisation in prices has brought some buyers back to the market as they expect that prices could soon rise. 

“The flow of offers [has] stopped and the really low prices have disappeared altogether now. We are being approached for hikes,” said a buyer. 

However, stock availability remains a cause for concern among a number of suppliers, which believe that producers are holding back volume from the market, opting to incur losses on storing large inventories that they will then attempt to offset in August and September.

A trader said: “I don’t believe in magic, or that material just disappeared. I think producers are literally playing poker now. Although they have a bad hand [high stocks] they are going to try and bluff their way through August, hoping that customers will react on export opportunities, high feedstock and fewer imports.”

This is a view echoed by numerous consumers who remain unconvinced that prices will rebound significantly over the next month.

One trader said: “Producers are not offering to traders in the quantity that they were in the previous month, but they are leaching material at a slow and steady pace into the market so it is impossible to raise prices.”

($1 = €0.70)

For more on PE, visit ICIS chemical intelligence

By: Stephanie Wilson
+44 20 8652 3214

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