06 January 2014 11:56 [Source: ICIS news]
By Linda Naylor
LONDON (ICIS)--European polyethylene (PE) buyers are facing higher prices in January, following the €15/tonne ($20/tonne) increase in the January ethylene contract and a rise of import duties on PE from established importers, sources said on Monday.
Business will be slow to start in January as parts of southern Europe return to work only after 6 January, but those players who have been back in the market for a few days said they are being informed of price hikes by suppliers who still complain of poor margins.
“My main MLLDPE (metallocene linear low density polyethylene) supplier has mentioned a €50/tonne increase but we haven’t gone any further than that so far,” said one buyer.
“My first guess for January polymer prices would be up by monomer is going to be unavoidable,” said another.
Buyers are keeping a close eye on upstream naphtha movements, however, and recent price falls have left some sceptical over how much of an increase can be passed on to the PE market with upstream prices falling.
Naphtha closed at $908-910/tonne CIF (cost insurance freight) NWE (northwest Europe) on Friday, and Brent crude was trading at $107.68/bbl on Monday morning.
One factor that is expected to affect PE pricing in Europe in 2014 is the increase of import duties from established importers such as GCC (Gulf Cooperation Council) countries. On 1 January 2014 duties were lifted from 3% to 6.5%.
As late as December several large buyers said they were relaxed about the increase in import duty but as time has progressed they are beginning to feel under more pressure.
“It’s hard to predict how the increase will impact pricing,” said one of the buyers. “I have been told that my main supplier [of imported PE] wants to recover the 3.5% but we haven’t settled yet.”
“They are being more aggressive on HD (high density polyethylene) than I expected.”
HDPE was widely regarded as the weakest PE grade, and it was in this sector that byers had been most relaxed. Linear low density polyethylene (LLDPE) buyers have generally been the ones who fear an increase most as an estimated 90% of European C4 (butene-based) LLDPE is imported, mainly from the Middle Eastern suppliers that have had their import duty changed.
On 30 December, Total Petrochemicals declared force majeure on HDPE from its Gonfreville, France, site, with no time frame given as to when production could resume to normal. Even so, it was the polypropylene (PP) force majeure declared from the same site that was causing more concern in the market as HDPE availability is not perceived to be tight.
“It will be the supply demand situation that determines pricing in January,” said another HDPE buyer.
With most business not yet under way and clearly no panic buying in the spot market so far for 2014, a major hike is not expected by much of the market.
Spot offers are coming through slightly higher than in December, indicating that while prices are not expected to decrease, nor are they expected to show any major upward move this month when they come under discussion.
“It’s too early to say what will happen in January, most of us are only back today,” said a PE trader on Monday.
Low density polyethylene (LDPE) spot prices were trading at €1,330-1,350/tonne FD (free delivered) NWE (northwest Europe) at the end of December, while HDPE prices were hard to lift and much business was still said to be done at €1,250/tonne FD NWE.
PE is used widely in the packaging and household goods sectors, and also in the agricultural industry.
($1 = €0.74)
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