Many rebates in August´s first half / Polyethylene especially hard hit / Polystyrene unchanged / Rising crude stabilises polymers over the month / Trend for September likely higher
PE: August was a disappointing month for European PE
producers. They had hoped at least to pocket the nominal cost reduction of EUR
20/t in the ethylene reference price by pushing through an across-the-board
rollover for PE prices and thus improve their margins. But it was not to be, and
also the quickly announced suspension of orders by some suppliers largely failed
to meet their objective because, as many people suspected, there was sufficient
material around after all. Grades pressured by imports fell particularly
heavily, while others were oriented more to the reference price. Towards the end
of the month, the situation increasingly stabilised against the background of
rising oil and naphtha prices, the gradual ending of the import season, and the
generally expected rise in the cost of ethylene.
Surprisingly, the C2 reference for September was carried over unchanged,
which meant that the many premature calls by producers for significant increases
- there was even talk of hikes of up to EUR 70/t! - seem very ambitious in view
of the stable costs. Consequently, many producers retreated to an increase of
EUR 40/t while others were even more modest, asking for EUR 20/t. Nevertheless,
it seems questionable in many cases whether even a rollover will be obtained,
especially with LLDPE and some types of HDPE.
PP:Early August still saw slight price declines for standard
PP grades. Over the following week, the situation stabilised, and the result was
frequently a rollover. Nevertheless, the month saw marginal declines. For the
first time, the compounds felt the influence of the new system of indexing to
standard PP prices. Despite the firming trend for C3, most compounded grades
followed the declines in standard material over the preceding months. This trend
mainly reflected the usual weak demand in the key summer holiday month of
August. The light-coloured compounds were an exception; they remained mostly
stable under the influence of the sharp rise in titanium dioxide notations.
The C3 reference contract for September saw a rise of EUR 20/t. Standard
grades can now be expected to rise by the same margin, though here and there the
hikes could be steeper. Due to the indexing, the compounds also will come under
this influence and trend higher. However, it remains to be seen whether this
will happen in September.
PVC: However much they tried, European producers of PVC base
material were unable to gain any margin increases in the holiday month of
August. In the end, they had to pass on the usual share of 50% (but no more, as
some buyers had wanted) of the drop in the ethylene reference price. The other
PVC types kept to the usual yardsticks. In particular, titanium dioxide remained
much calmer than many players had feared.
There is no sign of any substantial impulse for September. The ethylene
reference price will roll over and the market situation is largely balanced
despite all the scaremongering from the ethylene camp. This applies basically to
all PVC types. On the other hand, titanium dioxide sellers have already
announced the next round of price increases. It will depend on this whether the
rigid PVC blends move up a little.
Styrenics: After the rollover of the August SM reference
contract, notations for the majority of styrenics also remained stable,
especially as there was no other stimulus to affect prices. Only with ABS were
there one or two minor falls for standard grades because individual producers
and distributors were evidently feeling a little more generous. Demand in August
was largely dominated by the holiday season, although some players took
advantage of the comparatively low price level to build up stocks.
For September, no significant price changes are to be expected. Processors
aim for slight reductions, particularly as the September SM reference contract
receded by EUR 20/t. Meanwhile, PS and EPS producers are demanding higher
prices. A weak rollover could be a likely outcome. A certain upturn in business
could possibly come from the increased demand when converters begin building up
stocks again after their vacation, and also through the effects of the large
number of working days in September (22).
PET: In the first few weeks of August, there was no way for
European PET notations to go but to follow the earlier downward trend. In the
last third of the month, however, the combination of rising prices along the oil
chain and warmer weather resulted in a rise in demand for beverages, and with
it, PET. In response, notations stabilised, although taken over the month as a
whole, prices declined by anywhere between EUR 15-30/t.
Which way the winds will blow in September is still unclear. The overall
framework conditions continue to favour erosion. Amid uncertainty about price
developments across the oil chain, players will likely operate cautiously, which
would point towards stable notations - not least since demand across Europe
could rise if the good weather holds up. If oil prices stay put or decline,
however, PET producers will have no reason to lift notations.