Dow Europe seeks €70/tonne for Feb PE in sceptical market

01 February 2013 11:36  [Source: ICIS news]

LONDON (ICIS)--Dow Europe is targeting a €70/tonne ($95/tonne) price increase for polyethylene (PE) business in February, a company source said on Friday.

Some other producers intend to increase prices by €50/tonne, but buyers are sceptical.

“They got hardly anything in January, and nothing has changed in February, so why would prices go up?” said one large buyer.

“I have already been offered a rollover into February by one supplier,” said another.

There is no shortage of material in the PE market at present, with the possible exception of C4 (butene-based) linear low density polyethylene (LLDPE).

“It’s true that the market is flat and there is enough material, and upstream costs are flat, but we will be trying to increase prices in February,” said another producer.

Buyers are aware that polymer producers’ margins are thin, and some expect this to lead to acceptance of minor hikes.

“January prices went up only because we know that producers’ margins are bad, not because the market was tight, or strong,” said another buyer who felt that a €10/tonne increase might be implemented in February.

Demand in Europe has been poor for several months, giving hope to some sellers that February might see an upturn in volumes, simply because demand has been so flat. The alternative to this is that the market is suffering on poor European economies.

January PE prices rose by €30-50/tonne depending on the PE grade and seller in question.

At the end of the month, low density polyethylene (LDPE) net prices are trading around €1,330-1,350/tonne FD (free delivered) NWE (northwest Europe), more or less the same level as at the beginning of the month.

The only buyers who feel under real pressure to accept higher prices in February are those in the UK, where the weakness of the pound has led to lower prices in euro terms. Even here, though, several do not expect to take increases lying down.

On Thursday, Dow Chemical CEO, Andrew Liveris, said the company has to restructure further in Europe to deliver stronger margins in a slow growth and high-cost naphtha feedstock environment.

“Europe needs more rationalisation, more margin improvement, more restructuring as time goes by," he said in a conference call following the release of the US chemical major’s fourth-quarter and full-year 2012 financial results. "We will manage that with our portfolio management process".

PE is used in packaging and household goods industries, and also in the agricultural sector.

($1 = €0.74)

By: Linda Naylor
+44 20 8652 3214

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