Polyolefins mainly follow downward drift of precursors / PVC also on a downtrend / PS and PET rise / Stabilisation until consolidation in August likely
The ethylene reference price proved to be the main benchmark for many PE grades on the European market in July. Sometimes it was a bit more, sometimes a bit less, but the majority of price cuts hovered around the EUR 50/t mark. One radical exception was the group of LLDPE (C4) injection moulding grades, where a number of market bottlenecks even resulted in moderate increases. Overall, however, supply tended to thin out as producers gained an ever-stronger grip on the control of volumes. At the same time, business was quite lively because a large number of buyers suspected that prices would bottom out soon and so decided to top up their stocks as much as possible. And in this respect, they were not entirely wrong. The decline in costs has been brought to a halt by a rollover of the ethylene reference, the supply situation is tending tighter and demand is looking very strong for this time of year. All this means that prices of many grades could conceivably rise again slightly in August.
In July, European PP prices largely followed the propylene reference contract, as there were few impulses from either the supply or demand side. As many buyers sensed that prices had bottomed out and thus reached for their order books, producers could at least stop the erosion of their margins. Compounds, too, followed the reference guidelines. One important compounder is trying to adapt to the structural changes established last year by the leading player. But these corrections towards a higher price level are negotiated individually, so they do not influence the market generally and thus are not reflected in the price table. The propylene reference contract for August rolled over from July. As this year is seeing a classic summer lull, the market is relatively quiet and looks likely to stay that way for now.
In July 2017, Europe´s PVC suppliers passed on roughly half the cost savings achieved on ethylene for PVC base grades. The reductions were slightly lower for ready-to-use compounds due to the continuing tight supplies of titanium dioxide and plasticisers, but signs of easing were evident in both cases. PVC paste suppliers exploited the slight hints of a shortage to get minimal improvements in their margins. A stable sideways movement of notations is thus the most likely scenario.
The previous month's styrenics trends were continuing in July. PS and EPS could muster some modest price increases following an uptrending SM, while ABS notations trended further down following the latest butadiene crash of EUR 400/t. ABS suppliers still managed to improve their margins by transferring only part of the composite cost decrease to processors. The availability of styrenics was partly limited; additional EPS and ABS orders often had to be postponed to the next month. This trend might persist in August. For the current month, slight reductions are expected for all styrenics after the SM reference contract went down by EUR 30/t in August. For ABS, the cost of butadiene also fell by EUR 75/t.
The tightening situation on the market allowed European PET producers to increase their prices in July 2017, despite declining raw material costs. This resulted in noticeable margin increases. Free volumes were rare at the start of the month, and import activity had considerably tailed off in the wake of clear price rises in the Far East's domestic markets. Demand rose on a daily basis, spurred on by the hot weather that prevailed over large areas of Europe. Volumes became increasingly scarce in the second half of the month. This similarly affected recyclate suppliers who, as in previous months, were able to push through a slight increase in their profits again in July. While latent upwards pressure is still prevailing in August, a number of factors are also tugging in the opposite direction. Supply levels could rise relatively rapidly again, not least through imports emerging on the horizon. At the same time, demand should also subside somewhat. Rollovers would not be surprising. Further increases are conceivable too.