Dow Europe targets €150/tonne hike for April PE, market sceptical

29 March 2012 11:20  [Source: ICIS news]

LONDON (ICIS)--Dow Europe is targeting increases of €150/tonne ($200/tonne) for all its polyethylene (PE) grades in April, following a relatively modest €40/tonne increase in the April ethylene monomer contract price, a company source said on Thursday.

The move is based on continuing poor profitability, as naphtha costs remain at or around a record high level in euro terms, affecting cracker margins negatively.

The targeted increase is generally seen as over-ambitious by many in the market. PE prices have risen by more than 30% since the end of 2011, when producers were still reeling from a PE sell-off that left net prices below the headline ethylene contract price. They are still complaining of unsustainable margins.

“We have been playing catch up since the beginning of the year,” said a producer. “Prices have risen since January, but so have costs.”

“There is not a chance that this will go through,” said a large PE buyer, who nevertheless expected to be paying an increase more in line with the rise in the April ethylene contract.

March low density polyethylene (LDPE) net prices are trading about €1,400–1,450/tonne FD (free delivered) NWE (northwest Europe), with the March ethylene contract price at €1,305/tonne FD NWE. The ethylene contract price is subject to discounts. With naphtha trading at $1,049–1,057/tonne CIF (cost, insurance & freight) NWE, PE producers say that margins are too thin for current PE price levels to continue.

“I don’t think that they will even recover the monomer movement in April,” said another PE buyer.

April PE discussions are not yet underway, and in some cases March PE pricing is only just beginning.

PE is used widely in the packaging industry.

($1 = €0.75)

By: Linda Naylor
+44 20 8652 3214

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