04 July 2013 12:37 [Source: ICIS news]
Last week several producers made it clear they would be targeting higher prices in July, following the rollover in the July ethylene and propylene contracts. Dow announced a €50/tonne ($65/tonne) hike on its website, while others talked of plus €30-60/tonne.
The reaction to these targets has been very muted from buyers, some of whom have been able to recover stock levels enough to withhold from buying for the first part of the month.
“Nothing has been settled so far,” said one large PP buyer.
“It’s quiet out there,” said a seller who was still targeting higher prices in July.
“July will be order-book driven,” said a PE buyer, suggesting that producers may change their attitude to pricing once they have taken stock of demand levels next week. This view was echoed by others.
Low density polyethylene (LDPE) sellers were still confident of an increase in July, as they considered availability tight enough to support such a move. Fractional melt index 0.3 was particularly tight.
In spite of higher targets circulating in the European PE and PP markets for monthly contracted pricing, spot levels were largely stable, with some high-end numbers done in early June no longer viable.
C4 (butene based) linear low density polyethylene (LLDPE) availability was widely considered to be balanced to tight, and import volumes this year have been lower than they were in 2012. Spot prices reached €1,300/tonne FD (free delivered) NWE (northwest Europe) in June, but this level was no longer traded and €1,250-1,280/tonne FD NWE was seen as a more normal price level for the first week in July.
Some low-end prices - below €1,250/tonne FD NWE - were expected to increase, but sources expected only the very lowest levels to rise, rather than a general upward market move.
Low density polyethylene (LDPE) spot prices have moved similarly. Prices of €1,350/tonne FD NWE done in June were no longer viable, and €1,300-1,330/tonne FD NWE was considered to be a general market level this week.
High density polyethylene (HDPE) sellers were still aiming to lift prices, but buyers were more confident of avoiding hikes in this sector. Imports have been widely available and buyers did not expect sellers to want to lose market share, particularly in the blowmoulding and film sectors.
PP spot prices have been stable to slightly lower, but monthly sellers were still aiming for increases in July.
“I have been approached with increases of €10-20/tonne for July,” said another PP buyer. “I hope to get away with a rollover to plus €10/tonne.”
PP homopolymer injection spot prices have been trading within a wide range, but the general price range is €1,200-1,230/tonne FD NWE.
Many players arekeeping an eye on upstream developments to get an idea of the price direction for PE and PP in the coming weeks, but they are also looking at the level of potential demand.
May volumes for both PE and PP were very strong, following several months of weak demand. June continued strong, but most sources agreed that this demand was down to production cutbacks and restocking rather than any positive change in fundamentals.
“I bought enough in May to cover myself until the end of July,” said another PE buyer. “We bought everything in May and are now taking the cream from the milk.”
The success of July hikes will depend largely on the level of demand this month.
Production is thought to have increased to accommodate increased volumes, and crackers are estimated to be running at 85%, up from 75% earlier this year when PE and PP volumes were low.
PP and PE are used in the packaging and household goods sectors. PE is also used in the agricultural industry and PP is used in the automotive sector.
($1 = €0.77)
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