FocusEurope polymer producers eye increases for August

26 July 2013 11:41  [Source: ICIS news]

Europe polymer producers eye August increasesLONDON (ICIS)--Polyethylene (PE) and polypropylene (PP) producers in Europe have higher prices in mind for August even before monomer contracts are settled, sources said on Friday.

“We will be looking for around €80/tonne [increase],” said one producer who expected both ethylene and propylene monomer to rise by €50-60/tonne.

“Our idea is that [PE and PP] prices will rise in line with monomer,” said another.

“My supplier has already informed me I will be paying a €40/tonne ($53/tonne) increase for LDPE [low density polyethylene] next month,” said one buyer, and others confirmed similar conversations with their suppliers.

There was a level of exasperation at the lack of potential negotiation for August monthly LDPE pricing with one major supplier in particular.

“Where is the justification for this?” said another buyer.

Some PE and PP grades have tightened as July has progressed, because of a series of minor technical issues, the occasional lack of monomer, less imported volume and improved demand as buyers take on a little more stock.

Naphtha prices have dipped in recent days, however, and the stronger euro rate versus the dollar is advantageous to European producers.

When the July ethylene contract was settled at a rollover in June, naphtha was at $832-834/tonne CIF (cost, insurance & freight) NWE (northwest Europe) and on Friday it was trading at $875-877/tonne CIF NWE.

The difference in exchange rates means that naphtha today is around €15-16/tonne higher than when the July monomer contracts settled, leading some PE and PP buyers to question the validity of a €50-60/tonne increase in August monomer contracts.

Wherever contracts land for August, PE and PP demand is expected to be lower than in recent months as holidays and higher prices take their toll on volumes.

Some smaller buyers in particular have decided to take their chances and go away on holiday without buying extra volumes ahead of a possible price hike.

“It’s all a lot of big talk. It’ll fizzle out,” said one buyer.

“Demand will be quiet,” said another. “It’s the holiday season and demand in general is poor.”

The availability of some PE grades was considered tight enough for price increases to be pushed through in any case, and some higher spot prices were trading, but generally only on a truck by truck basis for low density polyethylene (LDPE) and C4 (butene-based) linear low density polyethylene (LLDPE).

Earlier in July, LDPE prices slipped below €1,300/tonne FD (free delivered) NWE on a net basis but such levels are no longer on offer. Similarly, levels below €1,250/tonne FD NWE for LLDPE have disappeared and the product is now trading at €1,270-1,280/tonne FD NWE.

PE and PP are used widely in the packaging and household goods sectors. PE is also used in agriculture and PP in the automotive industry.

($1 = €0.75)

By: Linda Naylor
+44 20 8652 3214

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