22 August 2013 17:34 [Source: ICIS news]
LONDON (ICIS)--A European high density polyethylene (HDPE) pipe producer is targeting up to a €100/tonne ($133/tonne) increase in September prices to strengthen margins, a company source said on Thursday.
It said it will look to add €50/tonne onto any increase in the September feedstock ethylene contract price.
“We have announced €100/tonne increase for everything. Margins are a disaster; we need to bring margins up,” the producer said.
Two other producers are looking to increase September prices beyond the cost pass-through of an expected rise in September ethylene prices.
“Demand should increase, create momentum for a wider spread between feedstock costs,” a second producer said.
August prices followed the €40/tonne increase in the ethylene contract price.
August demand has exceeded most players' forecasts, with some end-use market manufacturers in southern Europe returning early from vacation because of better-than-expected demand.
September demand is expected to strengthen significantly as the remaining participants return to the market after the European summer holiday period. Inventories have been kept low for most of 2013 and will need to be boosted.
Buyers and sellers said there is optimism in the market that underlying demand is improving overall, which is attributed to better macroeconomic conditions in the region.
“We see more and more signs that demand in Europe is starting to wake up. Real, underlying demand,” one of the producers added.
Construction sector activity has continued throughout August after a slow start caused by poor weather and flooding in Europe in the first half of 2013.
With the window of opportunity for building reduced, players will rush to carry out the majority of construction work in September and October, strengthening demand in those two months, one producer said.
Producers said stock levels are low, but buyers are not having difficulty in purchasing product due to the holiday slowdown.
“As a customer, I'm extremely seldom confronted with supply problems,” a buyer said.
“We don't have availability problems, we have heard it but not seen it ourselves,” a second buyer said.
However, any significant pick-up in demand in the coming weeks could see supply tighten unless producers move production rates accordingly.
($1 = €0.75)
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