Low inventory levels amid soaring upstream costs have pushed up polyethylene offers by almost 10% in Europe. PE buyers in Europe are facing heavy pressure to pay higher prices in January as per ICIS. Producers’ stocks were low as production had been cut back to avoid a repeat of the crash in prices in Q4-08. Despite high prices, demand was lacklustre and prices in Europe are believed to be increasing because of reduced supply and the strong pull from Asia, rather than any fundamental strength in the European market. Strong PE markets of Asia have resulted in fewer imports into Europe that are far between. Production problems and feedstock supply issues have affected supply from the Middle East, with speculation on the arrival of the long-awaited influx of new material would arrive in Europe.
Depending on how Asian demand fared during the year, European buyers hope that new capacities in the Middle East would have their effect in Q2-2010. The upcoming lunar new year holidays have led to speculation over the sustainability of demand in the key Chinese market. Monthly PE business in Europe had not picked up steam, but producers made it clear that they wanted price increases this month as naphtha has gone up; crackers are not making any money; customers have destocked and there is limited supply.