Higher costs overcome slow demand to push up global PE prices

04-Mar-11
PE markets have seen similar developments across the globe over the past week as prices rise on the strength of stronger upstream costs despite widespread complaints that demand is not as good as sellers had estimated, as per Chemorbis. Buyers in major global markets are currently bracing themselves for the possibility of further hikes from sellers, many of whom complain that they cannot recoup their production costs even at the current offer levels, while converters voiced similar complaints regarding their inability to maintain acceptable operating margins in the face of steadily increasing raw material costs. Crude oil futures on the Nymex settled at US$102.23/barrel on Wednesday, marking the first time the WTI benchmark has settled above the US$100/barrel threshold since August of 2008. Crude oil futures on the Nymex have risen by almost US$12/barrel when compared with the beginning of February, with much of the recent run-up in prices being blamed on supply concerns stemming from the ongoing political turmoil in Libya. Stronger crude oil prices along with concerns of supply disruptions resulting from political upheavals in the Middle East have also sent spot naphtha prices in both Asia and Europe above the US$1000/ton threshold recently, with spot naphtha prices posting month over month increases of around US$134/ton in Northwest Europe and US$112/ton in Northeast Asia. Ethylene prices have also risen along with crude and naphtha, with spot ethylene prices on a CFR NEA basis witnessing month over month increases of around US$60/ton while the European ethylene contract for March settled with an increase of €60/ton since February. In Asia, spot PE prices moved higher over the past week as producers lifted their prices in line with stronger upstream costs even as they acknowledged that they cannot attract much buying interest at the new offer levels. Two producers in Southeast Asia reported to have raised March HDPE film prices by US$100-110/ton from February while major Northeast Asian producers expressed their March sell ideas for HDPE film and LLDPE film to the Chinese market with increases of US$50-70/ton from February, although the producers have not made their official announcements yet as sellers within the country are struggling to conclude deals even at the current price levels. In Italy, initial spot offers for March emerged with increases of €60-70/ton this week in accordance with the increases in the March ethylene contract, while producers expressed hopes of achieving even larger increase of around €80-110/ton on the month. Although converters report that they are planning to delay their new purchases for as long as possible given their less than satisfactory end product demand, sellers say that they are planning to take a firm stance on their new offer levels, with one South European producer seeking a €50/ton increase on their March deals stating that they are unwilling to give any discounts from their new offer levels. Players in Turkey also reported seeing higher PE prices at the beginning of March. A global producer reported that they have already sold out their March allocation to the Turkish market with an increase of $30-50/ton from their February deals while several Middle Eastern producers have approached the market with initial hike targets of around $50/ton for March. Middle Eastern producers were also said to be seeking higher March prices in the Egyptian market, with one Middle Eastern producer announcing its HDPE film prices for March with increases of $60/ton from February while the domestic producer SIDPEC raised their offers for HDPE film and blow moulding by EGP600/ton ($102/ton) at the beginning of the month.
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