INEOS vows to improve Europe polymers margin in July

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.

Polyethylene (PE) and polypropylene (PP) prices have been under heavy downward pressure since May, reversing the trend begun in January 2012.

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)

By: Linda Naylor
+44 20 8652 3214

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