Austria-based Borealis targets €100/tonne hike for Jan PE and PP

23 December 2011 10:54  [Source: ICIS news]

LONDON (ICIS)--Major plastics producer Borealis is targeting a €100/tonne ($130/tonne) increase across all its polyethylene (PE) and polypropylene (PP) grades in Europe in January, the Austria-headquartered company said in a statement on Friday.

“This decision to increase prices reflects our assumptions on the economic development and it’s necessary for the implementation of our ‘Value Creation through Innovation’ strategy,” said Gerd Löbbert, Borealis’s executive vice president for polyolefins.

Other producers have also made it clear they will be targeting increases for January.

US-headquartered Dow Chemical announced a €120/tonne hike for its PE next month, while another producer said it would be seeking an increase of €100/tonne above the ethylene increase. This will now mean a €140/tonne increase, now that the January ethylene contract has settled up by €40/tonne.

Another major producer has said it will be seeking to improve PE and PP margins by €20–30/tonne in January, thereby targeting more modest increases next month.

Polyolefins margins are weak, and production has been cut back heftily to accommodate poor demand in quarter four. Producers admit that production will have to be curtailed for the foreseeable future, as European economies flounder and are not expected to improve in 2012.

Sources said that the success of January’s moves depends largely on the level of demand in Europe and also Asia.

European buyers have been able to get hold of material at very keen prices over the past few weeks, particularly in the PE sector, and low offers continue to be offered in the linear low density polyethylene (LLDPE) market.

The LLDPE sector remains the most hotly disputed PE sector, as one importer in particular continues to offer metallocene linear low density polyethylene (MLLDPE) at keen prices, affecting the whole LLDPE chain, as traditional sellers fight to keep market share.

Producers’ margins are very low, and most sources – both buyers and sellers – feel that prices have reached the bottom of the current cycle. One producer said that by its calculations, current margins are at a level only reached a handful of times in the past eight years, and are now at a point where they have historically rallied.

One large LLDPE buyer expects to be under pressure to pay an increase in January, but no more than the ethylene hike of €40/tonne – and even then, it aims to buy minimal quantities.

“I can’t see how they can still be fighting over market share, and offering low prices in December, and then be able to lift prices in January – but we will see,” the buyer said.

Europe’s 2012 is widely expected to be a poor year, but some sources see opportunities in the form of exports, as the euro remains weak against the dollar. They expect production to remain reduced, to accommodate weak demand, but not as reduced as it has been in the fourth quarter of 2011, as inventories along the chain are now thought to be minimal.

Large buyers, dependent on major producers for their volumes, have not been able to build much stock, while smaller buyers have managed to store some product.

($1 = €0.77)

For more on PE, PP and LLDPE visit ICIS chemical intelligence
For more on Borealis, Dow and other producers visit ICIS company intelligence

By: Linda Naylor
+44 20 8652 3214

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