Polyolefin producers secure slight margin gains / Upward momentum loses steam as month drags on / PVC and PS costs passed on / PET stagnant / February to see slight price declines
After a lively start to the New Year, the momentum that was evident among
European polyethylene producers gradually waned during the course of January.
Although the cost of ethylene had risen by only EUR 15/t at the beginning of the
year, many producers called for hikes of EUR 60-90/t. Initially, they won
increases of EUR 40-50/t, but from mid-month, falling oil and naphtha prices put
mounting pressure on the ethylene chain. As the month came to an end, most PE
producers had to make do with a very modest margin gain.
In terms of the market balance, there initially was some cause for concern
about the supply situation, but this improved relatively quickly. Cracker output
was cranked up due to falling naphtha costs, and this also fired PE production.
As the month drew to a close, there were few signs of any bottlenecks despite
the feared reductions in imports because of new EU customs duties.
After the propylene contract added around EUR 20/t in January, PP producers
called for hikes of up to EUR 60/t for standard-grade polymer. Early in the
month, they realised gains of around EUR 40/t but as the month progressed
notations retreated back to the monomer's rise. This was due to the improvement
in the supply situation and the retreat of oil and naphtha prices. At the end of
the month, margins had improved only slightly.
Solid demand allowed European S-PVC base producers to pass on the
proportionate rise in ethylene costs. The relatively mild winter weather meant
orders continued to roll in. Had the weather been harsher, the month would have
been much worse for producers. In the case of rigid PVC blends, the declining
cost of whitening agent titanium dioxide compensated for the rising matrix
costs, ensuring a rollover. By contrast, marginal hikes in PVC-P compound prices
meant the proportional cost rise was passed on. The same was true for E-PVC
paste, where the proportionate ethylene rise could largely be recouped.
The rise in the SM contract reference price pulled all styrenic polymers up
with it, but producers seeking to improve margins were unsuccessful in passing
on more than their higher costs. On a broad front, only PS manufacturers were
able to achieve margin gains. In the direct business, ABS producers - but not
distributors - were able to add in their higher costs. EPS producers saw their
Demand levels were in line with the short production
month. Many converters only returned to work in the second week of January, and
in many cases buying activity did not return to normal until mid-month. The mild
weather had a positive influence on EPS insulation grades used in the building
In the early days of January, there was talk of the occasional rise in
European PET prices, but as the month wore on, the trend was increasingly
pointing to a rollover. While North American prices fell slightly, the decline
was more pronounced in Asia. Even though producers had cut output rates, poor
demand meant there was more than enough material to go around, not least due to
On the recyclate front, the cost of both the higher-quality
transparent material as well as clear flakes moved sideways. Against the
backdrop of slightly rising base material prices, the price of mixed rPET flakes
With the ethylene contract reference price in February falling by EUR 40/t,
PE prices will naturally also come under pressure. Most sellers will try very
hard to push through a rollover, but it is doubtful that they will succeed. With
an increasing abundance of material on the market and upstream notations
continuing to decline, they will have hard time defending their position.
PP engineering compounds saw only minor gains. Freely negotiated transactions
were heavily under the influence of automotive industry contracts indexed to C3
notations, which moved forward insufficiently to make any significant
impression. In February, the propylene contract continued moving sideways, due
in part to soaring notations in North America. For this reason, PP product
prices are likely to remain stable in February. Standard grades could come under
stronger pressure due to developments upstream. All in all, headed into March,
the price barometer appears to be pointing downward.
Following the EUR 40/t fall in February´s ethylene contract, the entire PVC
chain is coming under pressure. With producers also feeling the strain of
caustic soda prices, this month will likely see a number of tough price battles.
With a total of 20 production days, February is an unusually long month this
year and it remains to be seen whether producers will manage to push through the
EUR 20/t proportionate cost decline.
With February´s monthly SM reference price up EUR 17/t against January,
styrenics prices are likely to continue trending upward, if only slightly.
Absent any other influences, notations probably will again move in line with raw
Structural overcapacities continue to pressure PET prices. With production
costs receding, buyers could potentially wring rebates out of their suppliers in
February. Looking ahead, the start-up of several new plants later this year
means that, by summer, the market can expect to see not only considerable
oversupply but also further consolidation.