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Europe PE buyers to face Jan hikes on soaring feedstocks

December 06/2010

(ICIS) -- European polyethylene (PE) producers are already talking of January price increases even before December discussions get fully under way, sources said on Monday. Cracker margins are squeezed. We will continue the battle into January, said one major producer.

PE buyers were finding themselves increasingly under pressure to accept higher prices in a month when they had expected some relief. The weak euro meant that imported volumes were down and availability was affected by production problems. There was also still some overhang from the French strikes at the end of October, which tightened availability.

The level of demand in December had taken many sellers by surprise. The high density polyethylene (HDPE) injection market in particular sought to understand why product availability had become so tight, when only weeks before buyers had expected to be able to get a modest decrease in December.

One reason that HDPE grades were not in such oversupply as buyers had expected was the lack of imported material. This was exacerbated by the weak euro rate versus the dollar, and delays in new Middle Eastern capacities.

Another reason was the very low profit margins in the HDPE sector in Europe. Net HDPE prices had been barely above the ethylene contract price for many weeks, and producers were now refusing to provide supplementary volumes to regular clients at the contract level.

Low density polyethylene (LDPE) availability continued to be tight, and some producers envisaged a situation where LDPE would be structurally undersupplied and command a permanent premium over other PE grades.


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