FocusEurope polyolefins players struggle over Sept pricing

05 September 2011 11:32  [Source: ICIS news]

PolypropyleneLONDON (ICIS)--Polyethylene (PE) and polypropylene (PP) buyers in Europe have been faced with announcements of rollovers or price increases for September, following decreases in both the ethylene and propylene monthly monomer contracts, market sources said on Monday.

The September ethylene monomer contract settled at €1,115/tonne ($1,570/tonne) FD (free delivered) NWE (northwest Europe), down by just €5/tonne from its August level, while the September propylene contract settled down by €37/tonne, at €1,078/tonne FD NWE.

The first week of September was unusually quiet in the polyolefins sector, but producers put this down to holidays.

“My view of the market for September is that it will go up. It just needs time,” said a major PE producer. “There is still buying appetite in Asia.”

However, there is a level of concern over demand in Europe.

“We just can’t see what our demand will be like for the coming weeks yet,” said a large PE buyer. “We are hoping for a clearer view soon.”

PE buyers are faced with announcements of increases from some suppliers, with Dow having made a public statement that it is seeking a €50/tonne increase in September. This is widely thought to be overambitious, and a competitor to Dow has informed its customers that it will be targeting a €20/tonne increase.

In spite of these announcements, however, the PE market is also rife with reports of spot offers of western European low density polyethylene (LDPE) in particular on offer below August levels, barely above the new ethylene contract in some cases, at €1,130–1,150/tonne FD NWE. This level is not confirmed by any western European source.

High density polyethylene (HDPE) sources see less competition among sellers, but there is little sign yet of buyers accepting hikes for September.

Polypropylene (PP) buyers are looking for a bigger decrease in September, hoping to get at least part of the €37/tonne decrease in September propylene.

“I am fairly sure I will be able to get minus €20/tonne, and we will push for the full propylene [decrease], but I don’t know whether they [producers] will let me have that,” said a large PP buyer.

Producers are confident of a rollover from August at this point in the month.

“We are at a normal level of order intake for the month,” said a PP producer. “We already have a couple of major accounts at a rollover. We desperately need to recover the margin we have lost this year.”

PE discussions will take time, as retroactive pricing arrangements are common in many areas, while PP discussions tend to be done earlier in the month.

“A lot depends on demand,” said another PP producer. “Once we can see the real level of demand for the month, discussion will get underway quickly.”

Another element adding to uncertainty in the polyolefins markets is the volatility upstream. On Monday morning, Brent crude oil had fallen to $111.36/bbl, from its Friday close of $112.33/bbl.

PE is used widely in the packaging and agricultural sectors. PP is also used in packaging and in the automotive industry.

($1 = €0.71)

For more on PE and PP visit ICIS chemical intelligence

By: Linda Naylor
+44 20 8652 3214

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