11 November 2011 12:00 [Source: ICIS news]
LONDON (ICIS)--Polyethylene (PE) buyers are trying to decide on strategy as the end of the year approaches, whether to build up stock ahead of a possible price increase in January or end 2011 with no stocks, to save on working capital, several said on Friday.
“I think I will buy in December,” said one large buyer. “I am being offered good spot prices. My feeling is that cracker cutbacks will be serious until the end of the year.”
But another large buyer said: “I intend to leave the year with zero stocks. We can’t risk millions of euros in building stock to avoid a possible €20/tonne [$27/tonne] increase in January pricing.”
These opposing approaches highlight the level of uncertainty in the PE market at present.
And Thursday’s downward revision of growth in 2012 by the EU, from 1.8% down to 0.5%, has done little to alleviate concerns.
“It’s like being in the casino,” said one buyer. “Very difficult to know what to do.”
PE producers have been cutting back production for weeks, but it is only recently that they have intensified cutbacks, following continuing weak demand for PE in ?xml:namespace>
One major producer says its low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) production will be run at 50% of capacity from the end of October to the end of 2011.
Italian petrochemical company Polimeri Europa’s Dunkirk LDPE and LLDPE assets have been down, albeit for unplanned maintenance, since the weekend of 21–22 October, and are not due back up until mid-November, at the earliest.
US chemical producer Dow Chemical has also significantly reduced its PE output at several sites in
Other producers are taking similar measures, but there has been no sign of an upturn in the market, despite Dow’s continued quest for higher prices.
Meanwhile a wide gap has emerged between monthly gross pricing levels and net spot prices.
Many buyers are now buying solely from their regular west European supplier, in order to achieve year-end rebates, which were pre-agreed at the beginning of the year. Rebates will applied to the whole of volumes taken throughout 2011, so most buyers will be doing their utmost to qualify.
This means that the headline reference price of €1,300/tonne FD (free delivered) NWE (northwest
The general mood of the PE market is gloomy. However, said one of the buyers: “We still have a couple of weeks to decide what to do by the end of the year.”
PE is used extensively in packaging and agricultural segments.
($1 = €0.74)
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