15 March 2012 11:09 [Source: ICIS news]
LONDON (ICIS)--Production problems in the low density polyethylene (LDPE) sector in Europe have led to tight supply and higher prices this month which may increase further in April, market sources said on Thursday.
Borealis’s 350,000 tonne/year LDPE plant at Stenungsund, Sweden, is out of action for technical reasons; INEOS has force majeure in place from its 360,000 tonne/year LDPE in Cologne, Germany; and LyondellBasell’s Wesseling LDPE production in Germany has been running at reduced rates for several weeks, following an explosion at the site in late January.
One major producer reports very strong offtake at present and is arranging deliveries on a truck-by-truck basis for converters to be able to cover production needs.
“We have had an order stop on LDPE since 8 March,” said the producer, “and additional requests keep coming in. Several converters say they are close to shutdown.”
The producer said that extra volumes are being sold at an increase of up to €140/tonne ($182/tonne) over February prices.
LDPE spot prices are in a very wide range, and spot sellers said demand is lacklustre after a good start to the month. Attempts to increase levels up to the high €1,400s/tonne FD (free delivered) NWE (northwest Europe) failed, and LDPE is currently trading around €1,380-1,450/tonne, with coating grades more expensive than commodity fractional melt index material.
PE producers are now considering their options for April. Some said they expected the April ethylene contract to increase by three digits, but these expectations are now tempered by a better balance in the ethylene sector.
Not all PE producers see constant increases as a good thing for the European market.
“We are hoping for some stability in April,” said another polyethylene (PE) producer. “We don’t expect anything like a three-digit increase in April ethylene. It wouldn’t be good for the market. Converters need to recover recent hikes. Either they recover them or go bankrupt.”
Some producers are thought to be preparing the PE market for more increases in April, however.
“Margins are still not satisfactory,” said the first producer. “Looking at margins, we are absolutely not satisfied.”
LDPE is used extensively in the packaging sector and also in the agricultural industry, where demand is seasonally strong at this time of year.
($1 = €0.77)
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