15 March 2012 16:43 [Source: ICIS news]
LONDON (ICIS)--European high density polyethylene (HDPE) pipe resin prices have increased by €110-125/tonne in March to the highest levels on record since ICIS started tracking the speciality PE grade in late 2009, according to buyers and sellers on Thursday.
Prices have moved up on average by 24% for PE 100 pipe-grade and 25% for PE 80 pipe-grade in the first quarter of 2012, driven by high feedstock ethylene costs and a better-balanced PE pipe market.
The average price in the PE 100 market has risen to €1,568/tonne ($2,036/tonne) FD (free delivered) NWE (northwest Europe) in March from €1,260/tonne in December, while the average in the PE 80 market has increased to €1,568/tonne from €1,255/tonne during the same period.
Producers have been targeting increases throughout the first quarter and have stood firm on high offers, maintaining it was imperative to recoup the losses made in the second half of 2011.
Producer margins for the speciality grade were hit hard last year because of the downward pressure on prices from slow demand and long supply.
Although a speciality grade, PE pipe prices were below that of HDPE commodity grades, including HDPE blow moulding and injection grades, for the most part of 2011. Prices are now more in line with the commodity grades (see chart).
Most buyers acknowledge that producers have been in a better position in the first quarter to obtain price increases. The PE pipe market in Europe has been well balanced since the beginning of the year, following reduced output towards the end of last year.
Additionally, two producers in Europe have had supply shortages in the first quarter because of ethylene constraints. A third producer is said to be short on PE pipe supply, but this could not be confirmed at source.
Visibility on demand is poor, however, with many sources arguing that rising prices would inevitably lead to lower demand.
Some buyers expressed concern that traditional materials, including metal, could see better demand compared with plastic for piping applications in the near future if PE pipe resin prices continue to rise.
Some producers admit order intake has slowed down and price increases have come at the expense of volumes.
Most agree that discussions with customers have been particularly tough through the first quarter.
PE pipes are used for natural gas distribution, industrial, water and sanitation piping applications.
($1 = €0.77)
Additional reporting by Linda Naylor
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