08 March 2013 09:22 [Source: ICB]
"Demand is poor and there is too much product," said a PE producer.
PE sales in Europe have been below average for six months and while sellers are hopeful that demand will improve in March, few expect any strong upturn in the short term.
PP demand has not been particularly strong either, but production setbacks and propylene supply issues mean that oversupply in this market is not so pronounced as in the PE sector.
Producers are targeting price increases in March, following an increase in monomer contracts. The March ethylene contract rose by €50/tonne ($65/tonne), to settle at €1,325/tonne FD (free delivered) NWE (northwest Europe), and the propylene monthly contract increased by €55/tonne, at €1,155/tonne FD NWE.
Some producers are targeting just the monomer increase for March, while others are aiming for some margin improvement.
Several ruled out selling at anything below the increase of monomer, a target that some buyers were confident of achieving.
"If we start losing margin there'll be no point running the plants," said a major producer. "The crackers are making no margin and the polymers are making no margin."
There was an uptick in spot PE activity following the settlement of the monomer contracts on 28 February, and while volumes have not been particularly strong, prices have edged up.
Low density PE (LDPE) is no longer trading below €1,300/tonne FD NWE, and spot sellers are pushing for levels closer to €1,350/tonne FD NWE, for other PE commodity grades, from levels around €1,300/tonne FD NWE.
Inventories of PE and PP are not thought to be particularly high along the chain and several sellers expect availability to tighten quickly if demand returns.
"We can only cover contractual business at the moment," said a PP producer. "We don't have enough for any extra business."
"They [buyers] won't buy a kilo more than they need," said another producer. "It's all too difficult to predict."
"This is a month when we will wait until the very end to get the best deal," said one large buyer. "Demand is down and everybody will be running down stocks, including our customers."
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