08/18/2015

PIE - Polymerprice Reports

Standard Thermoplastics July 2015

PE staggers sideways / PP margins fall / PVC notations mostly stable / Styrenics trip with monomer / PET also loses considerable ground / Downward momentum in August


PE: Many buyers had hoped that July would bring a
significant reversal to this year´s unparalleled upsurge in European PE
notations. In most cases, however, only the highest rises were capped while
contract volumes generally rolled over in line with the ethylene reference
price. On the spot market, too, notations settled down again in the second half
of the month after having initially undergone significant falls. It was mainly
the arrival of imports - usually of standard grades - that had resulted in the
initial price decline. However, the further the month progressed, the clearer it
became that there would be no enormous price reductions before the beginning of
August. Over the course of the month, European production progressively returned
to normal, but it was not enough to plug all the gaps. Nevertheless, the
allocation quotas were frequently raised, and most producers were able to supply
the forecast quantities for the regular business. On the open market, on the
other hand, there was little material around apart from imports. August will
certainly see price reductions. The ethylene reference fell by EUR 70/t,
reflecting the fact that previous production difficulties have eased. After
having had to tolerate regular price increases for so long, buyers see this as
an opportunity to "make hay", and in most cases are calling for price cuts in
excess of the monomer reduction. Producers, on the other hand, naturally want to
restrict the discounts to a percentage of the cost cuts, but they will probably
have to offer at least the monomer reduction to adequately stimulate business.
Many traders are predicting stable to rising prices in autumn, and, with
speculation in the back of their minds, now want to top up their stocks. To what
extent this will be enough to balance out the reluctance to buy of major
converters remains to be seen. The extent of the price reductions will be
considerably influenced by this.

PP: After the July propylene contract was fixed EUR 20/t
lower, producers drew the line for price reductions there. Unfortunately for
them, the line did not hold as supply increasingly returned to normal. Traders
were quick to react to the pressure, and this led to slightly higher rebates. In
the end, the decline on the polymer side offered outstripped the monomer's fall,
if only moderately. The higher-end indexed compounds closed the month with a
rollover, as expected. By contrast, producers relentlessly pulled low-lying
prices for basic black compounds up to scratch. The margin pressure faced by
independent compounders was simply too great to ignore. In August, downward
momentum across all products in the C3 chain seems a given. No matter how much
producers try to resist, standard PP products are likely to see a price slide at
least along the lines of the EUR 80/t plunge in the propylene contract. As the
monomer moves down a notch, indexed compounds will also come under pressure.
Independent contractors will hold onto as much of their price relief as possible
in an effort to gradually shore up sagging margins.

PVC: Trading at the beginning of July was still under the
impression of the preceding hectic weeks but as the month progressed, supply
improved considerably. In the mostly smooth price rounds, base PVC moved
sideways. Compounds lost a little momentum, in part reflecting lower titanium
dioxide notations in the semi-annual contract, but also because of sinking
plasticiser prices. The market for paste grade remained quiet, but the quarterly
contract price rose somewhat, recouping earlier ethylene price rises. In August,
notations for the most part will point moderately downward. The relief provided
by the proportionate EUR 35/t decline in the ethylene contract should provide
the framework for price cuts. On the compounding side, minor deterioration in
olefin-based additives should shave prices minimally.

Styrenics: In July, European PS producers had no other
option than to pass on their cost relief for styrene monomer. Here and there,
they had to throw in a small rebate to appease buyers who after months of
steeply rising prices wanted to see a little margin relief of their own. To make
a sale, there was often no alternative. EPS producers, at least, were able to
hold rebates below their feedstock relief margin. ABS largely remained calm. All
attempts by producers to raise prices came to nothing, but buyers generally
could not expect rebates, either. Even the increased influx of Asian imports did
not play much of a role, as this material was not very attractively priced. The
SM contract for August fell again moderately, this time by EUR 25/t. In view of
the largely balanced market situation, notations for PS and EPS could come down
by the same margin. ABS, too, could see some moderate rebates.

PET: European PET prices lost considerable ground in July,
thanks in particular to falling Asian notations that triggered imports and threw
the supply and demand balance off course again. With the ensuing market glut,
the market's structural problems became visible again - as had been forecast -
despite reported capacity cuts in some segments. In view of consistently sinking
prices, plastics converters, who were already sitting on full inventories, were
reluctant to order. As producers want to see their input costs sink as much as
their selling prices, the PX contract was still being intensively discussed at
press time. For most players, the suggested drop of EUR 15/t was by far not
enough. Downward pressure on prices will continue in August, whereby the extent
of the downturn is not yet apparent. The rollover some producers are propagating
will be difficult to achieve, especially as the peak beverage season is
over.

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