Dow Europe targets €80/tonne hike for Dec PE in tightening market

02 December 2013 11:14  [Source: ICIS news]

LONDON (ICIS)--Dow Europe is announcing a €80/tonne ($108/tonne) increase for its polyethylene (PE) in December, in a market where product availability is tightening fast for some grades, a company source said on Monday.

The move follows a €30/tonne increase in the December ethylene contract, which settled at €1,225/tonne FD (free delivered) NWE (northwest Europe).

“Demand is very strong,” said the source, also admitting that demand was artificial, as buyers come to the market to replenish low stocks ahead of what could be another increase in January.

Producers’ stocks are low, particularly in low density polyethylene (LDPE).

Production runs are at reduced rates and Dow has also taken the decision to temporarily close a cracker because of uncertain market conditions in the downstream PE sector.

Since that decision was taken, PE volumes have picked up, but the group's 650,000 tonne/year cracker in Tarragona, Spain, was already ramping down by the end of last week, ahead of its closure on 1 December. Sources expect the cracker to remain down for two months. Dow has both LDPE and LLDPE plants at the site.

Buyers have begun to notice tightness in the LDPE sector and fear a price increase in December is almost inevitable. One early settler already confirmed paying a €50/tonne increase for LDPE, but less for LLDPE, on Monday. “We are extremely busy,” said the buyer.

LyondellBasell’s 320,000 tonne/year LDPE plant in Aubette, France, has been experiencing production problems for some time, according to buyers. Large buyers admit they have had some supply issues because of this. The exact nature of the problems at the site is not known as LyondellBasell does not comment on the status of its plants.

Plants elsewhere are also widely thought to have been idled earlier this quarter, but there has been no confirmation from the producers concerned.

Eni's 150,000 tonne/year LDPE plant in Gela, Italy, has also been out of action for some weeks. The plant is expected to be brought down for good at the end of 2013. It is now unlikely to return to production, said sources, but this remains unconfirmed by the producer.  

Italy-based PE producer Versalis closed its LLDPE production in Priolo as planned at the end of the second quarter. The plant had a nominal capacity of 150,000 tonnes/year. Provision was made for buyers to be able to be supplied from the site until the end of the year and even beyond, however.

The closure of several older PE plants in Europe is planned or has already been done in the face of low-cost PE, mainly from the Middle East, and increasingly from the US as shale gas increases in importance there.

The majority of closures are for high density polyethylene (HDPE).

Dow

HDPE

Tessenderlo, Belgium

190kt

Closed

End 2012

LBI

HDPE

Wesseling, Germany

100kt

Closed

Q3 2013

Versalis

LLDPE

Priolo, Italy

150kt

Closed

Sep 2013

Total

HDPE

Antwerp, Belgium

70kt

To close

End 2014

Eni

LDPE

Gela, Italy

150kt

To close

End 2013

Borealis

HDPE

Burghausen, Germany

175kt

To close

End 2014

Against this backdrop, the increase in duty on both raw material and finished film from the Gulf Cooperation Council (GCC) region in January could also playing a role in the strong demand currently seen in the market, but not all sources agree on this. Duty will increase from 3% to 6.5% on 1 January 2104.

Several stretch film converters agreed that demand is very strong at present, but they feared that this would not continue for long, as buyers were filling stocks now to avoid another increase in January. Competition in this area is strong.

As Dow was targeting its €80/tonne hike for business this month, another seller was discussing ethylene plus €20/tonne, while another was reporting plus €50/tonne for PE in general, but plus €60/tonne for LDPE.

Many PE buyers will not settle before the end of the month, which is short in December, as most try to get business done before the holiday period.

($1 = €0.74)


By: Linda Naylor
+44 20 8652 3214



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