04 July 2012 16:26 [Source: ICIS news]
LONDON (ICIS)--INEOS Olefins and Polymers Europe on Wednesday revised its July pricing policy, limiting any further polymer price decrease to no more than €70/tonne ($89/tonne) despite a €170/tonne fall in ethylene and propylene monomer contracts, the Swiss-headquartered producer said.
“This has been done in light of what INEOS considers to be an over-correction in polymer pricing through May and June and the rapid escalation in oil/naphtha pricing currently underway,” it said in a statement, adding that the policy will take place with immediate effect.
By the end of June some net polyolefins prices were traded well below the headline ethylene monomer contract price of €1,205/tonne FD (free delivered) NWE (northwest Europe) and the propylene contract price of €1,105/tonne FD NWE, as a hefty decrease in the monomer contracts for July was widely expected on weaker naphtha and crude oil prices.
Both contracts fell by €170/tonne, but only days after the settlements crude oil and naphtha prices rallied.
Naphtha, which had fallen to below $700/tonne CIF (cost insurance freight) NWE in June from an April average price of above $1,000/tonne CIF NWE, was trading at $800-808/tonne on Wednesday morning and crude had also gone up.
Spot LDPE prices at the end of June reached a low of €950/tonne, from a high of around €1,400/tonne in April. PP was subjected to downward price pressure and homopolymer net injection prices were trading around €1,000/tonne FD NWE at the end of June.
In spite of INEOS’s attempts to stem the polyolefins price fall into July, some buyers have already been able to secure €170/tonne decreases for both PE and PP from their regular suppliers. Net PP and PE prices have not fallen further, however.
“I bought some PP last week at below €1,000/tonne,” said a buyer, “but I can’t get that this week.”
Bids for copolymer below €1,000/tonne FD NWE are no longer considered by sellers, in spite of some special deals done only days ago.
"Prices are bottoming out and everybody wants to buy. Suddenly I am everybody's best friend," said a PP trader.
A producer said: “We might as well export than give buyers that sort of price ... demand is good and the exchange rate is in our favour. We are now in a position where we can say no.”
A PP buyer said: “I have settled July at a reduction of €170/tonne from one supplier, and still discussing with the others ... I think it’s necessary to close quickly, as waiting a few days won’t help this month.”
There is already some talk in the market about a possible upturn in polymer pricing in August, but most players think it is too early to talk of increases.
“August is a summer month. Demand will be down. There is plenty of material around. It’s the market that drives the prices,” said a southern European PE distributor.
Speculation surrounding how long the current upward momentum of upstream increases can continue is rife, and any moves upstream will affect PE and PP pricing.
($1 = €0.79)
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