European low density polyethylene prices climb to eight-month high on cost pressure

European low density polyethylene spot prices broke above Eur1,300/mt ($1,727/mt) FD NWE, hitting an eight-month high due to soaring feedstock prices, sources said this week.

Linear low density PE and LDPE spot prices were assessed at Eur1,230-1,235/mt FD NWE and Eur1,325-1,330/mt FD NWE on Wednesday, surging by Eur50/mt and Eur85/mt on the week.

"Competitive offers have dried up in the market," a converter said, adding that the only relief was that they had pre-bought for January and February in the end of 2011 to cushion against expected price increases.

The weakness in dollar also broke the parity in Europe-Asia prices. LDPE FOB NWE was assessed at $1,595-1,600/mt Wednesday, compared with CFR FE Asia of $1,351/mt.

CFR FE Asia prices gained $36 on the week. The rise in the Asian market was capped on cautious buying after the Lunar new year holiday.

FOB NWE and CFR FE Asia prices were mostly in parity since July 2011 until mid-December. However, since the beginning of the year, LDPE prices in Europe has witnessed "dramatic" increases, leaving behind Asia.

"If prices in Europe become too high, Middle Eastern and Asia product will be diverted were, undercutting European producers who are already writing in red ink," a producer said.

European LDPE prices have skyrocketed following the Eur99/mt increase in the ethylene contract price for February. Energy costs in Europe remained high. March ICE Brent crude futures were trading at $118.14/barrel in the European morning Wednesday in due to cold weather, reduced inventories, heightened geopolitical tensions and an increased risk appetite.