02/12/2016

PIE - Polymer Price Reports

Standard Thermoplastics January 2016

Widespread declines dominate the picture as 2016 gets underway / Weakness in the oil chains demand its tribute / PE trending long / Additional declines likely in February

PE: Whereas in early January, European PE suppliers were
only willing to make small concessions, by mid-month the size of the price cuts
has become much more significant. The declines across the oil and petrochemical
chains provided the psychological setting for the ensuing price battles. Several
large producers readily offered rebates, and the high European price level also
attracted imports. The ports in Amsterdam, Rotterdam and Antwerp (ARA) are said
to hold high stock levels.
By the end of the month, the price cuts often
significantly exceeded the fall in the ethylene reference contract.


Notations will likely continue declining across a broad front in February,
too. The ethylene contract was fixed EUR 70/t lower, and buyers insist that at
least this decline be factored in. In view of the largely good and secure supply
situation, there could even be room for further declines. As spring draws
closer, the market is increasingly trending towards oversupply. New
export-oriented plants in Mexico, Egypt, Saudi Arabia and the United Arab
Emirates are preparing to push commercial quantities on to the market. Aside
from that, Iran is about to make a comeback as a direct supplier.
Please
note: This report introduces two new ranges for HDPE pipe grade.


PP: At the beginning of January, the producers were still
able to limit rebates to the EUR 50/t decline in the C3 reference contract.
However, as oil and petrochemical prices continued pointing downward, buyers´
bargaining chances increasingly improved. At the end of the month, the price
decline in some cases exceeded suppliers´ cost relief. Large accounts got the
best deal.


In the compound segment, a large producer's attempt to implement "structural”
changes outside the scope of existing contracts boomeranged. The result was that
the terms of the indexed contracts remained in place. This in turn influenced
the freely negotiated transactions.


The C3 reference contract for February dropped back by another EUR 60/t and
was fixed at EUR 560/t, only slightly above the record low of January 2009. This
will definitely push PP notations down a notch and bring the European market
further out of sync with North America, where prices are now pointing upward
again. The price differential is now approaching EUR 200/t, making exports to
North America increasingly interesting for European producers. This could
prevent a further deterioration of prices here.


Lower prices could also be on the horizon for compounds, although producers
will keep pushing for a decoupling of monomer and polymer prices. Automotive
buyers know the lay of the land and are not easily cowed, so that the roar of
the tiger about "structural adjustments” will continue to come across for the
most part as a soft meow. Producers will have their work cut out for them.


PVC: If there is one thing that is certain it is that
European PVC producers in January put up a tough fight to realise their
previously announced goal of lifting margins. The market leaders proved to be
particularly stubborn. In the end, they succeeded at pocketing a euro or two of
the nominal proportionate decline in the ethylene contract, which came to about
EUR 13/t. With availability trending long, there was no room for any further
gains.


Against this backdrop the price fight will likely enter round two in
February, and could intensify following the proportionate EUR 35/t drop in the
monthly ethylene contract. This will do little to deter large producers from
their goal of adding EUR 50/t to their margins in Q1 this year. All considered,
however, it seems likely that notations will decline moderately. Since the cost
of olefin-based additives, including modifiers and plasticisers, is also
pointing down, the price drop for ready-to-use blends could end up exceeding
that of the other materials.


Styrenics: PS was the only grade that bucked the general
downtrend brought about by the decline in January's SM reference contract. At
the beginning of the month, some PS suppliers even raised their prices slightly,
but during the course of January, improved availability meant notations
increasingly trended towards a rollover. EPS prices, on the other hand, took
their cue from the lower cost base, even if suppliers at times managed to pocket
parts of the cost reduction. The same was true for ABS. European producers' goal
of achieving even more substantial margin improvements stumbled over competition
from more favourably priced Asian imports.


Meanwhile, all signs point towards a further downtrend in February. The
renewed decline in the SM reference contract - this time by EUR 50/t - will
likely pull the entire styrenics chain down with it, not least since PS
availability is likely to improve.


PET: Against the backdrop of falling costs and rather muted
demand at the onset of the new calendar year, European PET notations also
embarked on a much more marked decline than before. PX receded by EUR 40/t,
while MEG was fixed EUR 75/t lower. Producers only passed on part of the cost
reduction - which came in at EUR 40-50/t. By comparison, the declines for small-
and medium-sized lots came to an average of EUR 35/t. Availability remained
long, as many processors speculated on additional price declines following the
rather customary weak start to the new year.


Looking ahead, it appears quite likely that notations will decline at least
moderately in February. Costs continue pointing down, availability is long, and
demand will likely return to more normal levels. Some processors will probably
start to build up their inventories again now that the winter slump is
ending.

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