Polyethylene producers are targeting higher prices in September amid increases in feedstock naphtha and improved economic data, sources said this week.
Naphtha was assessed at $914.5/mt CIF NWE Wednesday, up $2.50 on the week. The average value for naphtha so far this month is up to $899.90/mt CIF NWE, compared with July's average of $876.80/mt CIF NWE.
So far this month, low density polyethylene contract prices have increased by Eur40/mt ($53.40/mt), to be assessed at Eur1,475-1,480/mt FD NWE Wednesday.
"All economic indicators like construction data are improving. We are hopeful this will encourage us to carry more inventories. Right now inventories are thin," one polyethylene producer told Platts. "With issues at a Middle East supplier, along with record low inventories in Europe, this might be the time to improve our margin," a high density polyethylene producer said, adding that it would be targeting an increase of Eur100/mt.
Construction output in the European Union increased by 0.8% in June on the month, data agency Eurostat reported Tuesday. Also, Eurozone business activity picked up sharply in August, hitting a 26-month high point as the economy climbed out of a record recession, a survey showed on Thursday.
Converters were yet to take firm positions on September. However, some converters did report an improvement in order income. "Sales are up to plan and budget. It is quite good for this time of the year. We are optimistic for September and October," one converter said.
"We can't complain about orders at this moment from the polymer industry and food industry for bags. At the beginning of Q3, orders were two-three weeks ahead, now they are four weeks ahead," a converter said. Improved visibility on end-user demand was noted, converters added.
Ethylene is the product of the steam cracking of hydrocarbons such as naphtha, which is then used to produce polyethylene. The primary use of polyethylene is in film applications for packaging, carrier bags and trash liners.
