Price and market trends: Europe polyolefins sellers plan price hike

30 August 2013 09:40  [Source: ICB]

Some producers aim for an increase of over €100/tonne in September for PE and PP. Others see more modest gains

Polyethylene (PE) and polypropylene (PP) suppliers in Europe are preparing their buyers for price increases in September - following €40-60/tonne hikes in August - even before many PE settlements are finalised, sources said on 23 August.

There were widespread expectations of an increase in the ethylene and propylene monomer contract for September, based on tightness, high feedstock costs and unsatisfactory cracker margins, according to producers.

A wide price spread was mooted for increases, with sources generally talking a minimum hike of €20/tonne ($27/tonne) in September, and others hoping for a €60/tonne hike.

Several polyolefins producers have made it clear that they will also be targeting margin improvement, so will be announcing a higher increase for PP and PE than any rise in the monomer contracts.

Buyers recognise the need for sellers to recover their costs, but they are doubtful that they will be paying any more than a monomer increase in September.

"Stocks are below target and demand is good," said a PP producer. "Margins are still not satisfactory though."

A large PP buyer said: "What about our margins? Can demand sustain this?"

Another buyer said: "It's hard to argue that they shouldn't pass through the monomer increase." But he did not expect to be paying anything on top of the monomer settlement.

The PP supply/demand situation was widely considered to be balanced to tight, with some grades less available than others.

"The only grades I can get hold of are those I don't want," said a trader.

PE producers were even more bullish as inventory levels are very low across the board and demand was looking strong for September.

"We are experiencing our strongest order intake this year for September," said one producer, who went on to say it would be looking for a three-digit increase for September PE.

Another producer had been heard considering a €100/tonne hike for next month, on both PE and PP. Others were talking more modest rises, of €20-30/tonne above any increase in the monomer contract settlements. Buyers have been careful not to build stock of most PE grades and if demand returns strongly in September, producers could have an easy run when it comes to price hikes.

By: Linda Naylor
+44 20 8652 3214

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