29 January 2013 12:17 [Source: ICIS news]
LONDON (ICIS)--European polyethylene (PE) and polypropylene (PP) producers are aiming for higher prices in February, following a similar move in January that turned out to be disappointing as ambitious targets fell short, several said on Tuesday.
Numerous sellers complain of their lack of success in January, but prices increased across the board by €20-60/tonne ($27-81/tonne) depending on grade of product and starting point of price levels, in spite of a rollover in the upstream January ethylene contract and a €13/tonne drop in the propylene contract, leading to improved margins.
Producers say that current margins are not sustainable, however, and several are announcing increases of €50/tonne for both PE and PP for February, following the settlement of the February ethylene contract at a €1,275/tonne FD (free delivered) NWE (northwest Europe) rollover, and an increase of €10/tonne in the propylene contract, at €1,100/tonne FD NWE.
All sources agree that prices are up on reduced output, both planned and unplanned production outages in Europe and the Middle East, rather than on market fundamentals. European economies are still sluggish and no noticeable improvement is expected this year.
Buyers are not convinced about increases next month, particularly as Asian markets will be closing for holidays and the euro continues to strengthen against the dollar.
Some European buyers also note increased offers of high density polyethylene (HDPE) film grades and HDPE blowmoulding imports.
“I cannot see increases in February with ethylene rolling over,” said one large buyer.
Several large Middle Eastern plants remain out of action, however, and European producers intend to keep production reduced as naphtha, although volatile, still trades at a high level and maintains cost pressure on European polymer producers.
Discussions for February pricing are not expected to begin before next week at the earliest. Many PE buyers have still not settled January, as retroactive contracts are in place.
Low density polyethylene (LDPE) prices are traded around €1,350/tonne FD NWE and PP homopolymer injection prices are at €1,230-1,260/tonne FD NWE.
PE and PP are used widely in packaging and the manufacture of household goods. PP is also used in teh automotive industry and PE in agriculture.
($1 = €0.74)
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