FocusMild winter to warm up Europe PE pipe, PVC sales

17 January 2012 10:52  [Source: ICIS news]

By Cuckoo James and Abache Abreu

EuropeLONDON (ICIS)--A comparatively warm winter is helping sustain better-than-expected buying interest in the European polyethylene (PE) pipe-grade resin and polyvinyl chloride (PVC) plastic markets, industry sources said on Tuesday.

In some cases – such as PE pipes – it is touted to bring forward the beginning of the traditional ‘spring’ buying season.

“Mild winter weather is helping sustain levels of demand,” one PVC producer said.

“We are surprised that there have been so many enquiries,” another producer added.

“Downstream markets are benefiting from these temperatures,” a third PVC producer said. “But we also have enquiries from customers [that] are not producing, but pre-buying in anticipation of higher prices.”

Low inventories after year-end destocking activity and favourable currency exchange rates are also driving this increase in customer demand, improving sales volumes and balancing out the PE pipe resin and PVC markets.

Despite a pick-up in trading activity, PVC contract price ideas for January continue to point in different directions.

The European January ethylene contract price settled at €1,120/tonne ($1,418/tonne) FD (free delivered) NWE (northwest Europe) – up by €40/tonne from December. Producers are aiming for hikes of €50–60/tonne in order to offset the higher upstream prices and ease pressure on margins.

Buyers, on the other hand, are pushing for an increase of €10–40/tonne instead, depending on the region.

“Mild weather should help the whole sector,” one producer said. “There is no single reason to stop downstream construction, so it should be much easier to increase prices.”

In the PE pipe sector, both producers and buyers agree that prospects look good.

PE resin-to-pipe converters are taking a cautious, but positive, outlook for the first quarter from the downstream construction sector.

PE pipes are used for natural gas distribution, industrial, water and sanitation piping applications.

Many of these are installed below ground, generally translating into a low season for PE pipe sales in most of Europe during the winter months.

However, this year’s relatively warm winter has ensured that construction involving digging the ground for laying PE pipes has continued.

Buying interest has been better than expected – and, according to some players, even good in colder climes, such as Poland, Iberia, Scandinavia and some parts of Germany. Other areas of Europe do not see “the requests and orders we see over there”, said one distributor that regularly exports PE pipe resin across Europe.

“We have started the year good. We also expect to sell more if the mild winter continues,” said a Sweden-based PE pipe resin buyer.

The season for PE pipe traditionally begins in April, but it could start in February this year, the source added.

A second buyer said: “We are a bit optimistic. You can still bring pipe into the ground. We are not as negative as you hear in the newspapers.”

“Is it temporary? It is a bit early to say so,” the source added, referring to the possibility of a change in weather.

With improved demand and higher January feedstock ethylene price, sentiment in the European PE pipe resin market has become bullish.

Increases of up to €90/tonne have been put forward by suppliers.

Buyers resist these high levels. In reality, deals are being closed only at a €60–70/tonne increase, sources maintain, and sometimes only with a €40/tonne rise.

In December, the average price had fallen to its lowest in 2011, at €1,260/tonne FD NWE for black HDPE (high density polyethylene) 100 grade. Prices remain unchanged, pending further market confirmation.

If they go through, the proposed PE pipe resin increases would be the biggest since March 2011.

($1 = €0.79)

For more on PE and PVC visit ICIS chemical intelligence

By: Cuckoo James
+44 (0) 208 652 3214

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