08 November 2013 12:15 [Source: ICIS news]
By Linda Naylor
LONDON (ICIS)--European polyethylene (PE) players are assessing how the increase in duties from several established importers into Europe will affect pricing as the date they take effect approaches, several said on Friday.
Product coming from the GCC (Gulf Co-operation Council) area will be subject to a duty of 6.5%, from the current level of 3%, on 1 January 2014.
Europe is a huge net importer of linear low density polyethylene (LLDPE) from the Middle East, up to 90% of the market according to one large buyer, particularly from Saudi Arabia. Europe also imports increasing volumes of high density polyethylene (HDPE).
Opinions differ over how much the duty increase will affect European pricing, and several large players are still not sure of how they will be approaching the situation.
One large high density polyethylene (HDPE) buyer was not much concerned.
“Ultimately, it will be down to supply and demand,” it said.
Linear low density polyethylene (LLDPE) buyers could see a situation where importers could enforce higher prices in Europe, given the size of their market share.
One large LLDPE buyer said it expected prices to move more in line with low density polyethylene (LDPE) pricing, which usually commands a premium over LLDPE C4 (butene based).
Others thought the current supply/demand balance would favour buyers, and sellers would have to swallow the duty increase.
It was not clear if there would be an influx of imports before the end of the year from regions whose duty would increase.
“I’m expecting more people to try to squeeze more quantities in before the duty increases,” said the HDPE buyer, but not all players agreed this would happen.
Another large buyer did not agree.
“I don’t expect big imports [in December]. Nobody is trying to get volumes in by the end of the year to avoid the new duty,” it said. “We have to watch our working capital.”
“I can’t see more imports,” said a trader. “Our window of opportunity is very small.”
“The jury’s still out over whether we will pay more,” said yet another buyer.
“We are still discussing internally what to do,” said a major importer.
“I really don’t want to take the duty increase hit,” said another, but remained uncertain of how to approach sales in January as there was so much caution in the market.
The cautious attitude displayed by many players in the PE market is typical of buying behaviour throughout 2013, and importers for January are watching competitors closely to see if they could second-guess their intentions.
Some buyers were keen to know how sellers would approach the market.
“You can’t get an answer out of them,” said one buyer of imported PE.
Some players put the indecision down to uncertainty in polymer markets.
Some sellers were now seeing an upturn in demand in November as buyers come back to the market at what they think is the bottom of the cycle, and a couple of producers said that November volumes are the best they have seen for years.
There is an expectation that prices could increase in the coming weeks. Spot prices have been creeping up, and some sellers said they have no spot product to offer on certain PE grades for November. Increases have been limited to a few euros, however, and some players question whether demand can support a significant price rise.
Uncertainty looks set to continue for some time in polymers markets.
($1 = €0.74)
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