Europe PE buyers face strong hikes as producers target additional margin

LONDON (ICIS)–Polyethylene (PE) buyers are facing price hikes up to €95/tonne for February, sources said on Friday.

There was an array of offers, but none was as low as the €35/tonne increase of the February ethylene contract.

“The spread between monomer and polymer is at its lowest point for many months,” said a producer.

It wasn’t just producers’ margins that were forcing higher prices on to the market, however, but concern over supply and the possibility that grades may become tight as a series of planned cracker maintenance outages begins later in the quarter.

Security of supply has been of paramount importance in the PE market since the supply issues of 2015, and while sources saw the current situation as different to that of 2015, the expectation – and indeed current awareness – that imported volumes were lower, was adding to the concerns.

Under these circumstances, many buyers are expecting to be paying increases that go beyond the plus €35/tonne of the new ethylene contract.

“We are struggling,” said one large buyer, “and discussions are ongoing.”

Producers were confident.

“This is one of those months when retroactive settlements will be higher than early-month prices,” said one.

Retroactive pricing is common in the PE market, so many discussions will not be concluded for the month before its end. Most buyers acknowledge that prices will be done higher in February, but many are targeting hikes round €50/tonne.

A couple of suppliers are targeting such an increase, but they stressed that supply is tight.

“Demand is good,” said one such producer, “but order books are now full for February.”

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