Dow Europe targets €150/tonne increase on October PE amid cutbacks

16 September 2011 16:41  [Source: ICIS news]

LONDON (ICIS)--Dow Europe is targeting a €150/tonne increase on its October polyethylene (PE) business and will implement more production cutbacks in this market, a company source said on Friday.

“Dow has made adjustments to its production and will make more going forward,” said a source.

“Current economics are not sustainable,” he added.

September PE demand has been weak in Europe. Several producers have acknowledged that the only way to bring the market into balance is by cutting production.

Polimeri Europa also announced on Friday that it would be implementing a programme of cutbacks to reintroduce a better balance to the market.

Some sellers had initially put the current demand level in Europe down to tactical buying, but many converters say that their order books only extend to two weeks. A typical level is four weeks.

Most monthly PE settlements are nowhere near conclusion because many are done on a retroactive basis at the end of the month. Players are not convinced that prices will fall significantly.

Producers are hopeful that production cutbacks will have some effect soon. They do not expect large buyers to push too hard for decreases. This is because they will have to pass these on to their own markets ahead of what could be a stabilisation of pricing if cutbacks achieve their effect in September.

Not everybody took the Dow announcement seriously.

“They are mad,” one buyer said.

A couple of other players see the move as a way of bringing buyers back into the market but they see little possibility of its success at present.

Low density polyethylene (LDPE) spot offers are heard below €1,100/tonne ($1,528/tonne) FD (free delivered) NWE (northwest Europe) in some cases, down from €1,140/tonne FD NWE in mid-August. Monthly prices are significantly higher but will not be fully settled until the end of September.

PE is used widely in the manufacture of films for the packaging and agricultural sectors and in the manufacture of household goods.

($1 = €0.72)

For more on PE visit ICIS Chemical Intelligence

By: Linda Naylor
+44 20 8652 3214

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