18 August 2011 11:14 [Source: ICIS news]
LONDON (ICIS)--Polyethylene (PE) buyers in Europe have little appetite for increases in August, citing low demand and ample availability as reasons to reject higher offers, several said on Thursday.
PE producers had initially targeted increases of €50–100/tonne ($72–145/tonne) for the month, following a €30/tonne rise in the August ethylene contract price, but falling crude prices and a poor economic outlook in Europe have led some to abandon the idea of price increases altogether, said buyers.
“We are being offered western European product at old [July] prices,” said one large buyer of low density polyethylene (LDPE) and high density polyethylene (HDPE).
“Demand is ridiculously low,” said another large PE buyer. “Customers have been cancelling orders and everybody wants to sell.”
Another major PE buyer said: “I bought a lot of stock in July. I don’t need to buy much this month.”
Some HDPE blowmoulding buyers said that there could be a slight rise in prices, as margins have been poor in this sector and discussions so far have been tough. However, increases are expected to be limited.
“Producers are still targeting a €30/tonne increase,” said a large buyer, “but we don’t expect to be paying anything more than a nominal increase, perhaps €10 or €20/tonne.”
The mood in the European PE market has changed several times in August as crude prices have shifted, along with expectations for the September ethylene contract price.
In early August, producers were confident that there would be a significant increase in the September ethylene contract price and transmitted this view to their buyers, but as the month has progressed this seems less likely, although few players are ready to bet on where the new contract will land.
The situation in the Asian PE market is also uncertain, adding to nervousness in Europe.
“I can’t see much of a change in September,” said another buyer. “The producers have had it good in the first half of 2011. I see less risk of prices moving up significantly in the latter part of the year.”
PE prices in Europe took a tumble in July, falling by as much as €250/tonne in some cases, when imports from the Middle East flooded the market. Many buyers built up stock, leaving them in a comfortable position for August and September.
“Markets are very uncertain at present,” said another buyer, “but my gut feeling is that producers are still looking for volumes.”
LDPE net prices are reported at €1,130–1,180/tonne FD (free delivered) NWE (northwest Europe), while HDPE blowmoulding net levels are similar for European material, with imports lower. Very large buyers can usually benefit from lower levels.
LDPE is used in the manufacture of films for packaging and agricultural purposes, while HDPE blowmoulding is used mainly in the manufacture of plastic bottles.
($1 = €0.69)
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