UK PE buyers braced for hikes on crashing pound

LONDON (ICIS)–Polyethylene (PE) buyers in the UK are watching events on the currency markets with interest and some consternation as the pound fell sharply against the euro and the US dollar overnight, several said on Friday.

At 10.58 local time on Friday, the pound sterling had fallen below €1.11, according to Xe.com.

Source: Xe.com

“This will mean an increase of about £50 [per tonne] for me if it carries on like this,” said one buyer.

That calculation was based on a rollover in European pricing, and this was not yet clear as some producers are still looking to cover the €15/tonne increase of the October ethylene contract.

Most buyers that settle pricing on a freely negotiated basis in the PE market did not expect to be paying a price hike this month, with the possible exception of low density polyethylene (LDPE), but even here talks were largely on hold.

UK prices were settled in several ways. Some buyers take an average exchange rate at the end of the month and convert prices accordingly, others take a fixed point in the month, while others buy in euros and take care of currency hedging themselves.