Europe polymers players weigh up effects of higher import duties

20 September 2013 12:49  [Source: ICIS news]

LONDON (ICIS)--Polyethylene (PE) and polypropylene (PP) players in Europe are weighing up how increased import duties from established importers, including those from the GCC area (Gulf Co-operation Council), will affect pricing when duties increase from 3% to 6.5% on 1 January 2014, several said on Friday.

Imports have been playing an increasingly important role in Europe, particularly in the C4 (butene-added) linear low density polyethylene (LLDPE) and high density polyethylene (HDPE) sectors, and there is speculation over how this hike in duties will affect business.

“The bottom line is the market dictates what the price is. They [importers] have enough margin. There’s enough headroom for them to take it,” said one large HDPE buyer. “It won’t be a deterrent.”

Several other buyers agreed, but one C4 LLDPE buyer was not sure.

“Europe imports most of its C4 LLDPE – they will simply pass it on. On C4 linear there is every possibility that they’ll increase prices,”  it said. “It might not happen immediately, but it will happen.”

A couple of producers said they had not yet determined their approach for business based on new import duties.

Most imports into Europe are based on low-cost gas production, compared with naphtha-based output in Europe, and in recent years European producers have been coming under increasing pressure from low-cost competition from the Middle East.

There are now also threats from gas-based production in the US, based on shale gas, and this too is expected to maintain pressure on European PE players in particular.

Many European producers have investments in low-cost areas, or joint venture partnerships that give them access to lower-cost PE, and INEOS will be bringing over ethane for use in Europe, giving it access to lower cost feedstock.

PP imports are not as widespread as in the PE sector, and penetration into Europe has been far lower than in PE.

In mid-2014, new PP and PE capacity is coming on stream in Ruwais, Abu Dhabi, however, and this is expected to affect polymer pricing globally.

The project, entitled Borouge 3, includes an ethane cracker, two PE units and two PP units as well as a low density polyethylene (LDPE) unit. Two Borstar PE units producing 1,080,000 tonnes per year, two Borstar PP units producing 960,000 tonnes per year and a 350,000 tonne/year LDPE unit will be built alongside new ethane-based cracker capacity.

PE and PP producers in Europe have managed to lift prices in September, but generally only in line with the increase in September monomer contracts. Higher prices have affected demand and many buyers expect September pricing to be at the top of the current cycle.

LDPE spot prices are trading at around 1,380/tonne FD (free delivered) NWE (northwest Europe), while PP homopolymer injection spot levels are trading at €1,280-1,300/tonne FD NWE on a net basis.

($1 = €0.74)

By: Linda Naylor
+44 20 8652 3214

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