08/12/2016

PIE - Polymer Price Reports

Standard Thermoplastics July 2016

Polyethylene notations cave in / PP declines moderately / PVC under pressure / Styrenics notations in free fall / PET continues to erode / Stabilisation expected for August

PE: "All good things come to an end," European PE producers
were reminded in July after having enjoyed 15 months of high-flying margins. For
the first time since April 2015, significant price cuts drove down the nominal
margins over ethylene to a level of about EUR 500/t and less. For many long-term
customers, the shift in the direction of the once widespread levels of EUR
300-400/t was a welcome sight - after all, that alone suffices to allow
producers to make a good living. The price decline was set against the backdrop
of the undeniable tendency towards a surplus across all market segments, which
the small rise in the ethylene contract was unable to offset. The market was
awash with material from European production lines, output of which has
stabilised, and imported material, which had been attracted by the previous high
price level. Even grades not usually imported - including bimodal types -
appeared in large volumes. For many converters, who underwent a long period of
frustration, this has made life significantly easier. Some among them even
started building up stocks ahead of producers' widely expected tit-for-tat
response, while others did so with a view to their annual balance. The situation
is expected to stabilise in August. Following the EUR 20/t decline in the
monthly ethylene, producers will seek a rollover. At the same time, cracker
maintenance downtimes will reduce polymer availability. On the other hand,
demand tends to hit a low point in the central European summer holiday month of
August. All considered, these differing trends could balance each other out.


PP: At the beginning of July, some European PP producers
still hoped to be able to pass on the EUR 17.50 rise in the propylene reference
contract. Reports of tighter supply from various production facilities were
supposed to help their case, but as the month progressed it became clear that
fears of a bottleneck proved unfounded. Most supply gaps were filled by imports
streaming in from the Middle East and Asia. At the same time, numerous potential
buyers held back orders in expectation of falling prices. Thanks to the summer
lull in much of Europe, this was no hard task. Producers' margins fell back to
the level that in May 2015 was defined as the "new normal.” Business in the
compounding segment was relatively quiet except for the ongoing discussion about
indexing prices to standard PP. It will be interesting to see to what extent the
new structure will result in the price decline being passed on and what effect
it will have on the market as a whole. Apart from this, all PP products are
likely to see stability in August. There is no impulse from C3, imports are
slackening, and European production appears to be moving into holiday mode.
Demand will also be quiet throughout Europe, as French and Italian converters
will be in their annual summer hiatus.


PVC: True to its recent efforts, the European PVC market
leader kept up its battle to safeguard margins. The struggles were of no avail,
as in the end PVC base material suppliers mostly settled on a rollover, which
took a small bite out of their margins. After years of comparative calm, the
steady and steep rise in titanium dioxide notations has meanwhile continued to
drive up the price of both rigid PVC dry blends and compounds. Notations for the
white pigment have almost doubled since the autumn of last year, impacting the
price of blends, too. Demand proved disappointing to many producers, who had
hoped for a certain catch-up effect from the pipe segment. The current order
situation is not expected to change in the coming weeks, not least since demand
in many consumer markets - France and Italy among them - will decline over the
course of the summer holidays. With the monthly ethylene contract having been
settled slightly lower, notations will probably erode. The only exception to the
downtrend is PVC (U) blends, which remain under upward pressure as a result of
the rise in TiO2.


Styrenics: Styrenics prices gave way across the board in
July, following the steep EUR 125/t drop in the monthly styrene contract. In the
end, transactions spanned a rather large price range because negotiations tended
to be based on the already very heterogeneous price levels of the previous
month. Those who had managed to obtain reductions in June only succeeded at
pocketing a small share in July, while buyers who had paid the entire cost
increase in June were generally granted larger discounts. In the case of PS and
EPS especially, some of the declines actually exceeded the cost reduction, not
least since the widespread reluctance to buy in June meant there was a lot of
material up for grabs. With regard to ABS, by contrast, some suppliers were able
to pocket a share of the EUR 68/t cost decline. Following the rollover in
August's monthly SM price, most players expect notations to hold largely stable.
With demand likely to be rather weak in the main central European holiday month,
PS and EPS prices especially could slip slightly.


PET: As in previous months, the European PET market was
highly heterogeneous in July. Numerous buyers were able to obtain material at
lower prices, while others only achieved a rollover. Most of the latter had,
however, been able to gain rebates earlier, usually towards the end of June.
However, the price of bulk orders for commodities dropped slightly, driven down
by the unusually high number of import volumes this year. The difference to
notations for smaller lots can reach up to EUR 200/t - not exactly a healthy or
sustainable situation. European producers are only fanning the flames by
lowering output rates and focusing on speciality grades. In August, the overall
picture will probably tend towards price erosions. With few impulses on either
the supply or demand side, most players are keeping track of cost developments
to provide further guidance.

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