19 April 2012 16:01 [Source: ICIS news]
LONDON (ICIS)--European high density polyethylene (HDPE) pipe resin prices have risen by €30-40/tonne in April, its lowest monthly increase this year, despite producers initially targeting hikes of plus €70/tonne, producers and converters said on Thursday.
"We started the month at plus €70/tonne ($92/tonne), but there has been a big pushback from the market, so we closed at plus €40/tonne," said a PE pipe producer.
A second producer said; "estimated feasible increases [are] between €25-35/tonne" in April, while a third producer said it has closed deals at plus €40-50/tonne.
The April increases are modest, especially in comparison with the sharp hikes in the first quarter.
Most producers managed to push through large increases in the first quarter to recoup a fall in margins in late 2011, despite buyers' concerns about passing on additional costs to a shaky downstream construction sector.
One producer explained the reason for the producer flexibility in April: "Customers have a choice, because they still have some stock left. Unless they have large projects. Even the large projects that start in April would have settled their requirements for raw material in March."
April is the beginning of the peak season in the finished PE pipe market.
Despite the low increase, the price of April PE 100 and 80 pipe grades at €1,595-1,610/tonne FD (free delivered) NWE (northwest Europe) is a record-high figure since ICIS first started tracking the speciality grade in late 2009.
Buyers were expecting a comparatively modest price movement in the PE pipe market ever since the European feedstock ethylene contract price for April settled at an increase of €40/tonne to €1,345/tonne FD NWE.
"We have noticed this month an easing of expectations, in terms of more acceptance during the conversations [with producers]. There was certainly less bullishness among producers," said a PE pipe buyer.
Prices increased by €110-125/tonne in March. On average, PE 100 and 80 pipe-grade prices rose by 24% and 25% respectively in the first quarter because of rising ethylene costs and a better-balanced PE pipe market.
"In February, March we have seen ethylene plus. In April, only ethylene. In May we might see stability," the buyer said.
Both producers and converters are tracking crude oil and naptha prices in preparation for May pricing negotiations.
One producer said: "I don’t believe there will be a reduction in May, although this is the sentiment. We are still paying the same price for naphtha despite the lower crude price."
Although a speciality grade, producer margins for the material were hit hard last year because of a downward pressure on prices from slow demand and long supply.
PE pipe prices were below that of commodity grades, including HDPE blow moulding and injection grades, for much of 2011. Prices are now more in line with the commodity grades (see chart).
($1 = €0.76)
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