FocusSlow start for Europe PE, PP in 2012, but prices up

04 January 2012 15:17  [Source: ICIS news]

LONDON (ICIS)--Polyethylene (PE) and polypropylene (PP) buyers in Europe are faced with higher prices in January, and while many expect to be paying more, there has been little firm business during the first week to support hefty hikes proposed by producers in December, market sources said on Wednesday.

Most buying sources available for comment said that they expect to be paying the increases seen in upstream ethylene and propylene contracts, but nothing like the three-figure increases announced by some polyolefins producers at the end of 2011.

“I have heard nothing this week except the stupidly aggressive comments that they [producers] can’t support,” said one large buyer, alluding to targets as high as plus €140/tonne for January PE.

The January ethylene contract rose by €40/tonne ($52/tonne) from December to €1,120/tonne FD (free delivered) NWE (northwest Europe), while January propylene increased by €20/tonne to €1,015/tonne FD NWE.

Net PE prices had been trading barely above the monomer contract in December, and producers’ margins are poor, leading to announcements for price hikes in January.

Borealis is targeting a €100/tonne increase on its PE and PP this month, while Dow has announced a €140/tonne hike for January PE. One major PE producer is said by some buyers to be targeting a more modest €60/tonne increase for January, but this is not confirmed.

“I expect to be paying around a €50/tonne increase [for PE and PP] in January,” said the large buyer. “Some PP grades are now tight because of cutbacks.”
PE and PP output was curtailed heavily as demand weakened in the fourth quarter of 2011, and some very low-priced spot deals were heard in December, sometimes below €1,000/tonne FD NWE, but these have now disappeared.

“It’s all a question of demand,” said a trader. “Smaller and medium-sized buyers have built some stock and are still receiving deliveries of material settled in December. The very low prices will have gone by the end of the month but I can’t see anybody paying three-figure increases.”

“It’s too early to tell where January prices will land,” said another buyer. “I am almost sure I will have to pay monomer, and possibly €10–20/tonne more, but I won’t be paying €100/tonne increases.”

Business is expected to begin next week. Italy, one of the largest plastics markets in Europe, will only be fully back from holiday on 9 January. Other regions are waiting to see how serious European producers are in their aims to increase before settling new business.

“It will be a poker game,” said the trader. “Nobody will buy yet.”

Low density polyethylene (LDPE) net prices are now around €1,110–1,120/tonne FD NWE for the most part, up from early December levels of €1,030–1,070/tonne FD NWE.

PE and PP are used widely in packaging. PP is also used extensively in the automotive sector, and PE in agriculture.

($1 = €0.77)

For more on PE and PP visit ICIS chemical intelligence

By: Linda Naylor
+44 20 8652 3214

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