06 December 2012 10:20 [Source: ICIS news]
By Linda Naylor
LONDON (ICIS)--Polyethylene (PE) spot prices have risen by as much as €50/tonne ($66/tonne) and sometimes more in Europe this week as buyers hurry to secure volumes ahead of what they fear could be a bigger increase to come, sources said on Thursday.
“They [buyers] have no stock, they need to buy and they are scared of what might happen in January,” said a trader. “We are not seeing the usual end-of-year sell-off from producers.”
Low density polyethylene (LDPE) spot prices, that were in the mid-€1,200s/tonne FD (free delivered) NWE (northwest Europe) at the end of November, are now quoted at €1,300/tonne FD NWE minimum, with some smaller buyers paying a good deal more.
The trend for December and January monthly pricing is still not clear, but producers have withdrawn low-priced spot offers that were typical of the PE market in early November and also at the end of 2011, when prices fell sharply.
“There are different trends in the market which make it hard to know where the price is going,” said one large PE buyer.
Some producers have announced increases for December PE pricing, but it is not clear whether higher prices can be pushed on to the market.
“I have settled at a rollover for December, after a €50/tonne drop in November,” said another buyer.
Most PE buyers have yet to settle, as retroactive pricing arrangements remain firmly in place, particularly in the low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) sectors.
Inventories with both buyers and sellers are restricted. Buyers fear keeping high-priced material in their warehouses in an uncertain situation, and producers have cut back production heavily to avoid the same thing. Some sources estimate that production in Europe is running at below 80%.
Port congestion in Saudi Arabia has also meant fewer imported volumes in past weeks.
Under these circumstances, a price increase could be on the cards for January, if buyers come back to the market en masse. On the other hand a fall in naphtha prices, something that sources upstream have been expecting for some time, would stifle any potential upward price movement in the PE market.
However, sources stress that fundamentals remain weak as European economies continue to struggle and impact other regions.
“We expect 2013 to be bad,” said a producer.
PE is used widely in packaging and agricultural sectors.
($1 = €0.76)
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