FocusEurope PE, PP buyers under strong Dec price pressure

13 December 2013 11:08  [Source: ICIS news]

By Linda Naylor

Europe PE, PP buyers face Dec price pressureLONDON (ICIS)--European polyethylene (PE) and polypropylene (PP) prices are moving up in line with, and sometimes beyond, the €30/tonne ($41/tonne) increase in the December ethylene and propylene contracts, sources said on Friday.

Demand for most PE and PP grades has not been particularly strong in December, but production cutbacks and better-than-expected volumes in some cases as buyers ensure they reach end-year volumes for an additional discount, have supported pricing.

Some PE buyers, particularly in the high density polyethylene (HDPE) sector - which was widely seen as the weakest PE grade - said they would pay the €30/tonne increase as they acknowledged that producers’ margins were poor, having lost more than the drop in the ethylene contracts in October and November.

“I would say they cannot afford going below plus €30/tonne after conceding more than the monomer in the past two months,” said one buyer.

“Buyers realise they shouldn’t push too far,” said another. “Net net prices are very low.”

This sentiment was echoed by several buyers in the HDPE sector.

The situation in the low density polyethylene (LDPE) sector was different. Production cutbacks at the cracker and polymer level have tightened availability and there is now some tightness in the LDPE market.

“Dow is telling me I have to pay a €50/tonne increase for December LDPE, take it or leave it,” said another large buyer. Other buyers also said they were under similar pressure from the Swiss-based producer that has recently temporarily closed a cracker because of uncertain PE demand.

LDPE prices are often settled at the end of the month on a retroactive basis, so the upshot of disagreements over December pricing is not yet known, but spot LDPE prices have risen sharply.

LDPE is now trading at €1,320/tonne FD (free delivered) NWE (northwest Europe), with some sales done as high as €1,350/tonne. Prices were almost €100/tonne lower at the end of October.

Some sources saw this as a sign that January prices would increase, and some players expect an upturn in January as naphtha prices are strong and producers’ margins  remain unsustainable.

A similar sentiment existed in the PP market. Despite some tightness here and there, however, sellers found it hard to lift prices beyond €30/tonne, and spot prices were higher but had been slower to move than LDPE pricing.

In mid-December, PP homopolymer injection prices were trading at €,1230-1,250/tonne FD (free delivered) NWE (northwest Europe), up by a modest €40/tonne from the end of October.

An unknown factor in these markets was the affect of the increase in duty from established importers. Import duties will increase from 3% to 6.5% on 1 January but increasingly buyers expected to be facing higher prices as the pull from Asia was still strong for Middle Eastern suppliers.

The month is still being discussed but much of the focus was now turning to 2014.

($1 = €0.73)

By: Linda Naylor
+44 20 8652 3214

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