Price and market trends: Europe PE, PP buyers warn of bubble on talk of big Sept hikes

06 September 2013 10:02  [Source: ICB]

Converters acknowledge the upward trend for September pricing, and question only the magnitude of the hikes

Polyethylene (PE) and polypropylene (PP) buyers are concerned the current upward price momentum that suggests big hikes in September could lead to a crash in subsequent months, and they are keeping a close eye on stock, several said on 30 August.

"They [producers] are expecting us to restock in September but we could be looking at three-digit drops by October," said one buyer. "We're buying in a bubble and will be very cautious."

Another said: "We are bracing ourselves for a hike in September, but what next?" He feared that the naphtha price could fall as sharply as it has risen. "It's a time for stout hearts and clear heads."

CONTRACT NEGOTIATIONS
Polymer markets were waiting for the outcome of monomer contract negotiations. The European propylene contract settlement for September was confirmed at €1,150/tonne ($1,513/tonne), up by €60/tonne from August, following further buyer support late on 2 September. The initial propylene settlement, which is on an FD (free delivered) NWE (northwest Europe) basis, was agreed between one integrated consumer and two sellers.

The European ethylene monthly contract for September was confirmed at €1,260/tonne ($1,658/tonne), up by €50/tonne from August, following support from a second seller on 3 September. One of the settling buyers said it was a good compromise between the feed increase and the downstream situation.

The main fear of polymer buyers was to be holding too much high-priced stock in such an uncertain situation. Buyers argued that naphtha prices could drop just as quickly as they have risen.

Both producers and converters have low inventories and the upward momentum building for September pricing is unlikely to change in the coming days.

INCREASE TOO HIGH
One PE producer has already outlined plans for September pricing and talked of a €150/tonne ($197/tonne) increase. This was considered to be too high by most of the market, however.

Most producers were waiting for the outcome of the monomer negotiations before announcing pricing ideas for September polyolefins, but expectations were for more modest increases.

Converters acknowledged the almost inevitable trend for September pricing, and questioned only the magnitude of a hike. "We can't argue with the monomer [increase in line with monomer increase]," said a PP buyer.


By: Linda Naylor
+44 20 8652 3214



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