14 June 2013 10:40 [Source: ICIS news]
By Linda Naylor
LONDON (ICIS)--Polyethylene (PE) buyers in Europe are under strong pressure to pay more for material in June as they continue to replenish low stocks, sources agreed on Friday.
Market participants said, however, that the level of increase depends much on the grade in question, adding the outlook remains uncertain for pricing and demand in July and August..
“My supplier told me he wanted a €60/tonne ($80/tonne) increase at the beginning of the month and now he’s talking plus €80/tonne,” said one low density polyethylene (LDPE) buyer.
LDPE availability is tight, with some sellers closing order books early for June, and other buyers have confirmed a strengthening trend as the month has progressed.
Spot prices are trading at €1,300-1,350/tonne FD (free delivered) NWE (northwest Europe), from a low of €1,150/tonne FD NWE at the beginning of May.
Linear low density polyethylene (LLDPE) availability is also balanced to tight, and buyers confirm hikes of €50/tonne, with spot prices in the mid-to-high €1,200s/tonne FD NWE.
High density polyethylene (HDPE) blow moulding prices have been slower to increase as product is more widely available.
“The market has lost momentum,” said a large buyer. “Our stocks are quite high now because we managed to buy spot product some weeks ago when prices were lower.”
HDPE blow moulding spot prices were below €1,150/tonne FD NWE in the early days of May and lower prices were said to be available to large buyers. They were trading in the low €1,200s/tonne FD NWE mid-June.
HDPE injection was the strongest HDPE grade and prices reached the high €1,200s/tonne FD NWE in June from a low of €1,170/tonne FD NWE in early May.
Producers are confident of the current upward momentum continuing into July, particularly for LDPE and LLDPE, but many buyers expect it to come to an end in July, or at the latest, August.
“I am not brave enough to fill my warehouses until the end of July,” said one buyer. “There is still a reluctance to go away on holiday in a market that doesn’t make any sense.”
Other sources said the current upward trend was based on production cutbacks, in place for several months to accommodate poor PE demand, rather than on any fundamental strength in the market.
The upturn began in May when buyers returned to the market to replenish low stock levels, and the momentum has continued into June.
June volumes have not been as strong as May, however, and producers are aware that if production is ramped up a downward trend could emerge as demand slows down for summer.
PE and PP are used widely in the manufacture of household goods and in packaging. PP is also used in the automotive sector and PE in agriculture.
($1 = €0.75)
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