Tight supply fundamentals in the European polyethylene market are driving price increases, industry sources said this week.

Low density polyethylene spot prices were assessed at Eur1,302.50/mt ($1,604/mt) FD NWE Wednesday, up Eur10/mt on the week. LDPE contract prices were up Eur40/mt on the week to Eur1,352.50/mt FD NWE.

The spike was partly attributable to European producers maintaining low runs to avoid costly inventory builds as feedstock prices rise.

"We have learnt our lesson from 2011, when we ended the year with high inventories. We do not want a repeat of that this year," one producer said.

Feedstock naphtha prices accelerated to 921.75/mt CIF NWE Wednesday, gaining $68/mt on the week.

European producers were heard contemplating order stops on August deliveries because of "unusually buoyant" demand.

Congestion in the Middle East transport system due to Ramadan was also delaying deliveries of imports, sources said. They added that while currency movements and increases in European prices made Europe an attractive export destination, the congestion and long lead time from Asia had dried up imports for prompt delivery.

On the buying side, converters said that the demand outlook remained vulnerable, particularly in Southern Europe.

"Demand to carry on these increases isn't present," a specialized film converter said, adding that improvement in buying activity since end July was driven by depleted stock levels.

"Demand for high value brands in detergents, lubricants, personal care, pharmaceuticals and food is down this year, especially in the south of Europe," another converter said.