06 October 2011 12:31 [Source: ICIS news]
By Linda Naylor
LONDON (ICIS)--The mood in the European polyethylene (PE) market is one of uncertainty and hesitation as buyers and sellers inform each other of their expectations for October, sources said on Thursday.
There has been a slow start to the month and demand is still looking weak, with sources estimating that cracker and polymer output is now at around 80% of capacity.
Even at this rate, and with one low density polyethylene (LDPE) plant out unplanned for a week so far, buyers continue to report ample availability.
“They [converters] are just not buying. The question is, is an 80% production rate enough to balance the market?” said one PE producer.
Producers have announced targeted increases of €50-60/tonne ($67-80/tonne) for October PE pricing, but buyers do not expect to be paying any extra for their material in October.
“Nobody with any sense is going to build stock in October. We will carry on buying exactly what we need, and if a producer wants us to pay more, we will buy elsewhere,” said a large buyer.
Reports throughout Europe suggest that there are enough local suppliers ready to offer material, particularly LDPE and C4 linear low density polyethylene (LLDPE) at knockdown prices in a move to retain market share. This has been so far limited to spot offers.
“Market rules are no longer working,” said another producer. “Everything is pushing for a decrease: raw materials have gone down; demand is poor; there is too much material, but feedstock costs are so high that we simply cannot allow prices to fall.”
Despite recent falls in Brent crude and naphtha prices, European producers have not been able to gain as much advantage as they might due to the weak euro, which has increased their costs as crude and naphtha trade in dollars.
Brent crude oil dipped below $100/bbl for the first time in many months, and naphtha is now trading at $863-871/tonne CIF (cost insurance freight) NWE (northwest Europe), down from a high which touched $1,000/tonne in recent weeks. Brent crude was trading at $103.24/bbl late morning on Thursday.
Several PE buyers said on Thursday that they had been approached by their regular suppliers with offers of a rollover already for October, and there have been few reports of LDPE shortages over the unplanned outage of LyondellBasell’s 320,000 tonne/year Aubette, France, plant due to strike action at the Berre refinery site.
LDPE net prices are reported in a very wide range, at €1,000-1,200/tonne FD (free delivered) NWE, while C4 LLDPE is lower, with net prices talked as low as €1,030/tonne in extreme cases. High density polyethylene (HPDE) remains firmer than the commodity film grades.
Discussions surrounding LDPE and LLDPE are notoriously long, and usually settle very late in the month, due to many retroactive arrangements at large accounts, so the battle over October pricing is expected to last for some time yet.
PE is used widely in the manufacture of films for the packaging and agricultural sectors and in the manufacture of household goods.
($1 = €0.75)
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