06 February 2013 17:20 [Source: ICIS news]
LONDON (ICIS)--European PC producers will target price increases of more than €0.22/kg in March to recover dwindling margins, sources said on Wednesday.
The first-quarter PC assessment by ICIS is at €2.25-2.45/kg ($3.04-3.31/kg) free delivered (FD) northwest Europe (NWE) for moulding grade and €2.15-2.25/kg FD NWE for extrusion grade PC.
One major PC producer said it has sent letters to its customers announcing its intention to increase prices, while another said it was still mulling what it should target but added it would definitely be in the upper €0.20s/kg range.
"We announced a price increase of €0.22/kg on 4 February effective from the 4 March because we still need to recover all time high raw material costs even though benzene prices dropped this month," the first producer said.
The next round of negotiations look likely to be tough because most buyers said they will definitely not accept any increases as their sales are down and they cannot pass on any prices rises.
"Producers are in a vicious circle of trying to maintain sales volumes but at the same time trying to increase prices to improve margins, but the two things cannot work together at a time when sales are so poor," a CD producer said.
It added that most producers will probably choose to keep customers and maintain volumes over improving margins because at the end of the day it is better to sell even at thin margins than to shut the plants down.
Another buyer said during January there was a slight recovery in sales but there will not be any improvement in February because everyone is hesitant to commit and buy large volumes of PC.
"My biggest problem is that I do not know what my customers want to do in the long term as they are unwilling to commit to buy volumes more than six weeks in advance," the buyer said.
One producer said it has been struggling to pass on increases because of tough competition with other sellers offering material at a lower price. It added that as long as the market is oversupplied, it will be difficult for producers to pass on any increases.
Another producer said it will be tough during negotiations but it will not budge for customers and will force the increases because it needs to improve its margins.
Contract negotiations are ongoing.
($1 = €0.74)
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