UK PE buyers could face Feb price pressure on exchange rate

24 January 2013 10:57  [Source: ICIS news]

The pound has fallen against the euroLONDON (ICIS)--UK polyethylene (PE) buyers could face an upward price adjustment in February, as the pound-euro exchange rate has changed significantly over the past couple of weeks, leading to lower prices in the UK than in mainland Europe, sources said on Thursday.

“A couple of my suppliers have said they will review prices in February, in the light of the pound-euro exchange rate,” one buyer said.

So far in January there has been no considerable attempt to foist bigger increases on to UK buyers than continental buyers.

The pound has fallen against the euro in the past couple of weeks. On 4 January the euro was worth 81 pence, but by 24 January it was worth 84 pence.

Net low density polyethylene (LDPE) spot prices of £1,090/tonne ($1,730/tonne, €1,298/tonne) FD (free delivered) NWE (northwest Europe) at the beginning of January were worth around €1,345/tonne, but would now be worth barely €1,300/tonne FD NWE.

There has also been some erosion in the LDPE sector this week, although spot business has been very thin, with levels seen at £1,080/tonne – or around €1,286/tonne.

LDPE spot prices in mainland Europe are still seen around €1,350/tonne FD NWE, although lower prices are now being heard.

There are two PE production sites in the UK – one at Wilton, where Saudi Arabia’s SABIC has the capacity to produce 400,000 tonnes/year of LDPE, and one at Grangemouth in Scotland, where Switzerland-headquartered INEOS produces 320,000 tonnes/year of linear low density polyethylene (LLDPE).

Netherlands-based producer LyondellBasell closed its 185,000 tonne/year LDPE plant at Carrington in the UK at the end of 2009.

Discrepancies such as those currently seen in Europe have been levelled out in the past, but such a process can take more than a month, as much depends on the state of the market.

“Nobody has approached us about February pricing yet,” said another UK buyer, “In fact we still haven’t settled January, but producers will only be able to apply extra increases in the UK if demand is strong elsewhere in Europe.”

Demand in January has been disappointing for suppliers, and earlier targets – some as high as plus €160/tonne for January contracted business, including those from producer Dow Europe – have been abandoned. Prices are higher but increases are more modest, at €30-50/tonne.

PE is used widely in the packaging industry and for the manufacture of household goods, along with the agricultural sector. 

($1 = €0.75, €1 = £0.84)

By: Linda Naylor
+44 20 8652 3214

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