Europe PE sellers looking for more margin in March

Focus article by Linda Naylor

LONDON (ICIS)–Several European polyethylene (PE) buyers have said they have been informed by their suppliers that they will be faced with increases greater than the €100/tonne in the March ethylene contract, several said on Friday.

The March ethylene contract settled on Thursday at €910/tonne FD (free delivered) NWE (northwest Europe).

PE producers have managed to gain margin on some freely-negotiated PE prices, while ethylene-linked business moved in line with the monomer contract, down by €70/tonne in February.

“Conditions are favourable for an increase of more than the ethylene contract,” said one seller, citing strong demand and tight availability in support of the move.

Some buyers are sceptical of producers being able to gain margin, particularly with such a hefty monomer increase, and in a rising market.

“It’s true we find it harder to build margin when prices r going up than when going down,” said another producer. “We are still seeing strong demand, though, and people seem to be building some stock.”

One large buyer was in no mood to add to producers’ margins in March. “It is a monstrous idea and totally unjustified,”  it said.

“I can’t see prices going up beyond the 100 [€/tonne],” said another. “They managed to hold on to additional margin in the past months.”

End-February pricing discussions at retroactive accounts have been difficult. Product availability has tightened as the month has progressed and early offers of minus €70/tonne have been withdrawn by some suppliers at freely-negotiated accounts.

“I had to pay an extra €50/tonne for extra volumes outside my contract,” said another buyer.

“It is a month when it would have been better to settle at the beginning rather than at the end,” said another.

Linear low density polyethylene (LLDPE) and high density polyethylene (HDPE) film and pipe grades remained the tightest in terms of availability, but other grades were also tightening as buyers had come back to the market to buy at the bottom.

Sources questioned how March demand would be, as higher prices are on offer and some stocks will already have been built in February. There was no great concern on behalf of producers, however.

“Traders don’t have material,” said one, “conditions are there for price hikes. It’s a seller’s market.”

PE is used widely in packaging, in the manufacture of household goods and also in the agricultural industry.