21 December 2012 10:34 [Source: ICIS news]
LONDON (ICIS)--Leading plastics producer Borealis has announced increases of €100/tonne ($132/tonne) for January polyethylene (PE) and €75/tonne for January polypropylene (PP) in Europe, the company said in a statement on Friday.
“The decision to increase prices is based on the development in the market over the last couple of months that requires us to react,” comments Alfred Stern, Borealis Executive Vice President Polyolefins in its statement.
Several PE buyers have said that Dow Europe is also informing its customers that it is targeting increases of €160/tonne in January.
All producers have been complaining of unsustainable margins in recent weeks, as naphtha prices have remained high and production rates low, affecting further their margins. Estimates are that production in Europe is running at 75-78% of capacity.
Demand has been flat throughout 2012, and most sources expect the year to be down on 2011 when final figures are revealed, and 2011 was not a very strong year.
Prices have seen big swings throughout 2012 as stock has shifted from buyers to sellers and back again, and many sources expect a similar scenario in 2013, as European economies continue to struggle and new capacities come on stream in low-cost production areas.
Most buyers are resigned to the possibility that prices may increase in January.
“We have already talked ourselves into higher prices for January,” said a large PE buyer.
Stocks with producers are low, because of cutbacks rather than strong demand, and most buyers are leaving 2012 with very low stock levels.
Low density polyethylene (LDPE) spot prices have risen by 12.5% since the beginning of November, and are now trading at around €1,350/tonne FD (free delivered) NWE (northwest Europe).
PP homopolymer injection prices have seen a more modest increase, of around 6%, since mid-November, and are now trading at around €1,250/tonne FD NWE.
Many December PE prices are still under discussion, with some producers attempting to force increases onto the market, but they are facing heavy resistance.
PE and PP are used widely in packaging and in the manufacture of household goods. PE is also used in the agricultural sector and PP in the automotive industry.
($1 = €0.76)
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