PIE - Polymerprice Reports

Standard Thermoplastics March 2014

Drop in PE notations exceeds ethylene decline / PVC still weak / PP remains stable / Styrenics follow downward feedstock costs / PET in free fall / Prices likely to firm in April

PE: The European polyethylene market in March 2014
once again showed two different faces. Producers were forced to acknowledge that
they had ramped up production a little too much in February. With plenty of
material on the market, PE spot notations quickly caved in, which in turn raised
contract customers' expectations. By mid-month, producers had managed to get a
better grip on the situation. After having implemented production cutbacks, some
of them even turned down additional orders, while traders´ stocks were emptied
just as quickly as they had been filled. All these countermeasures, however,
came too late for regular orders, most of which had been confirmed at the
ethylene cost decline. Additional material, on the other hand, was only
available at higher prices - if at all. Looking towards April, one can safely
say that the operation has been successful. Despite a renewed fall in the
ethylene contract, producers are sticking to their call for an extra EUR 40/t
for all PE types and most could succeed this time around. Their strategy of
actively controlling the amount of material put on the market seems to have
worked, not least since demand remains lively and is unlikely to be much
affected by the Easter break. It is thus quite likely that prices will rise, at
least moderately.

PP: As the propylene reference contract rolled
over from February to March, producers of standard PP also had to be content
with a rollover. For top-up orders, however, they were able to push through
hikes of EUR 20/t, in particular where customers were paying low prices. For PP
engineering compounds there was no movement, thanks as usual to contracts
indexed to C3. Over the course of March, supply bottlenecks for standard PP
drove spot prices higher. The tightness at the polymer end reflected
developments upstream. Because of the slow ethylene off-take that followed the
brief February rally, some cracker operators reduced capacity utilisation rates
again. In the face of normal to strong demand, this carved deep gashes into
propylene supply. In April, all commodities along the propylene chain are under
intense upward pressure. Propylene is up EUR 10/t, and PP producers hopeful of
improving margins will try to seize the opportunity to lift prices by EUR 30/t.
Their chances of success are relatively good. PP compounds, by contrast, are
likely to continue moving sideways.

PVC: Although producers fought tooth and nail over
every euro, they were unable to realise their March calls for S-PVC price hikes
and in fact had to concede a large part of the proportionate decline for
ethylene, which makes up about 50% in the vinyls cost mix. With additive prices
largely stable, PVC compound notations declined by the respective drop in the
cost of the matrix material. Suppliers of PVC pastes, however, had to pass on
the full ethylene cost reduction. As a result, PVC producers - most of which are
integrated in the chlorine chain - remained stuck with the minimal revenues for
caustic soda. Although it appears as that, following a year of successive
declines, the latter has finally bottomed out, there are no signs that prices
will rise anytime soon. Coupled with a renewed decline in the ethylene contract,
the structurally long supply situation will make it hard for suppliers to turn a
profit. Even though the construction season is about to begin, all signs point
to a weak rollover in April.

PS: The EUR 57/t decline in March´s styrene
reference contract pulled styrenics notations downward. PS and ABS followed SM,
with producers' attempts to pocket a part of their cost reduction thwarted by
cheap imports. Only EPS producers were able to achieve margin gains, as demand
from the building sector began to pick up. A major EPS producer's switch to the
new polymeric flame retardant sharpened pricing dynamics. ABS and EPS volumes
moved well in March, while weak demand curbed PS off-take. On the whole,
styrenics producers had matched output relatively well to demand, so that the
market remained more or less in balance. As in previous months, price movements
for styrenic polymers in April will closely reflect the development of styrene
costs. Thus, the EUR 15/t increase in the SM reference contract can be expected
to translate into slightly higher prices at least for PS and ABS. Hikes for EPS
could be somewhat steeper as demand from the building industry gains additional
momentum, and the substitution of polymeric for HBCD flame retardants continues
to shake up the market.

PET: European PET prices showed further substantial declines
in March. The cost decline of nearly EUR 170/t for principal feedstock
paraxylene (PX) seen in February and March, in combination with a still
oversupplied market, made the downswing inevitable. In North America and Asia,
the same trend was seen, although toward the end of the month, the latter region
saw some signs of stabilisation. The lower PX price in March will put further
sharp downward pressure on PET notations in April. Even with the revival of the
beverage season, the presence of imports from outside Europe will do nothing to
relieve the oversupply situation for bottle polymer. The same can be said for
the perspective of new capacities coming on stream over the course of the year
in Europe as well as on its boundaries.

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