LyondellBasell introduces EU energy surcharge on LDPE, HDPE, PP

LyondellBasell has introduced an energy surcharge on its European sales of polypropylene, high-density polyethylene and low-density polyethylene, according to a letter to customers dated Sept. 1 and seen by S&P Global Commodity Insights.

The surcharge is based on the average of the German month-ahead forward power price and will total Eur160/mt during September, the company said. The surcharge will then automatically increase or decrease in following months according to the electricity price.

"Triggered by the Ukraine war and the boycott of Russian gas, in the past months we have seen a further and very significant increase in the costs of natural gas, electricity and freight in all countries in Europe," the customer letter said, noting that Lyondell would continue to cover "a majority" of increased production costs.

"We consider this Energy Surcharge to be fair, given the fact that the increased production costs for our manufacturing facilities are still considerably higher than the proposed surcharge. Therefore, LyondellBasell will continue to bear a majority of the increased production costs."

German month-ahead power for September ended August at Eur464/MWh, up almost tenfold year-on-year, with the contract having reached an all-time high settlement price of Eur670/MWh on Aug. 26, EEX exchange data show.

Platts assessed homopolymer injection grade polypropylene at Eur1,350/mt FD NWE on Sept. 2, down from a peak of Eur2,000/mt during April and Eur1,620/mt a year ago.

Similarly, the FD NWE LDPE spot price was assessed at Eur1,475/mt Sept. 2, down from a peak of Eur2,220/mt in April and Eur1,800/mt on Sept. 2, 2021.

LyondellBasell is Europe's largest HDPE and PP producer and third largest LDPE producer, according to S&P Global Commodity Insights data.