06/11/2015

PIE - Polymerprice Reports

Standard Thermoplastics May 2015

Polyolefin notations continue to soar / New records keep being set / PVC uptrend gathering steam / PS holds firm at a high level / PET climbing / June expected to see additional increases

PE: The reservoir of superlatives used to describe the
current PE situation is gradually running out. In May 2015, prices of all grades
sold in Europe rose to heights not seen since PIE first started reporting them
in the early 1980s. The picture is dominated by extreme shortages and even super
high prices fail to attract any imports. The market remains drastically
undersupplied. The previous interruptions to petrochemical production plants in
northwest Europe, which appeared to be easing early in the month, were followed
by major outages at several key facilities in southern Europe, shattering any
hopes for recovery.


There is no turning back, and in June notations will continue to advance
toward the historic level of EUR 2,000/t. Although European price levels are
highly attractive - in part thanks to the euro´s stabilisation - there are
hardly any imports. It is thus quite likely that key Middle Eastern producers
like Petro Rabigh are also suffering from widespread production problems, as
suggested by various reports. There is little else one can do at the moment than
to hope that the dark clouds hanging over the market will dissipate soon.


PP: As was the case in April, the cost of propylene did not
play a major role when it came to prices for standard PP grades in May. The C3
contract added EUR 75/t but, due to the market's extreme tightness, the increase
in standard grades was twice that. The timid glimmer of hope that the supply
situation would improve was quenched by the almost uninterrupted series of new
force majeure declarations at crackers - this time in southern Europe. Nailing
down sufficient supplies became increasingly problematic.


In the meantime, compounders' margins have come under substantial pressure.
Due to the many indexed contracts, the PP engineering grades last month again
saw increases below the monomer rise. Those compounders who did not stock up
early in the year, when prices were lower, found themselves economically up a
creek without a paddle. In May, notations for standard grades were often higher
than those for the cheapest compounds. Needless to say, this type of situation
cannot continue for long.


The problem will literally compound itself in June, when further price rises
are expected. With certainty, PP prices will hit historic highs. At present
there are no indications that supply will lengthen, and even converters who
judiciously filled inventories to the brim in January will be forced to buy. Or,
better said, would do so if there was anything to buy. The market's problems are
reaching catastrophic dimensions.


PVC: Availability of PVC worsened in May, as processors
found it extremely difficult to obtain material. Following a string of force
majeure announcements in the second half of the month, the more recent past
appeared blissful even. A lack of input material is threatening to take PVC
lines out of operation temporarily, in a repeat of the scenario reported for the
polyolefin front in both March and April. These developments set the stage for
the near triple-digit hike in S-PVC base material. Prices of both blends and the
related E-PVC also rose substantially.


There are no signs yet of any improvement in production. The outages at the
most significant crackers - including in Lavera - are expected to last at least
until late June, and Wesseling could even be down until September. It is
unlikely that imports will offer any relief - in many cases quality issues in
fact make any substitution impossible. Meanwhile, June's ethylene contract rose
by EUR 60/t, setting the stage for renewed hikes, of up to triple digits, for
S-PVC.


PS: The tightness in the SM market drove styrenics prices up
further in May 2015. However, most suppliers were only able to pass on the
renewed EUR 20/t increase in the monthly reference contract in transactions
settled at the beginning of the month. As time wore on, the gains continued to
erode and some buyers even managed to obtain a rollover or slight decreases.
They were helped by an improvement in the supply situation, brought about by
May's numerous bank holidays and bridge days.


The picture on the ABS front was entirely different, as demand continued to
exceed supply, with import volumes extremely sparse. Those European suppliers
whose volumes were on allocation were thus able to pull up low-lying prices. In
the final tally, the rises tended to mirror the cost increase, reaching roughly
EUR 35/t.


The current situation is not expected to change much in June. Tight supply
has driven up the monthly SM contract by another EUR 20/t, even though benzene
retreated by EUR 111/t. This means styrenics prices will probably remain high
and could even rise further. The trend reversal, which processors are so
desperately hoping for, will only come about once the SM supply situation
eases.


PET: Although suppliers of the mostly small- and
medium-sized PET orders reported by PIE managed to lift notations in May, the
hikes fell short of the cost rise. Most transactions had already been settled
when the surprisingly steep hike in the monthly MEG contract was announced,
which lifted the PET cost mix by about EUR 95/t. As a result, the price of bulk
orders, which are often tied to feedstock developments, rose above average and
started to approach the PIE range once again. The market trend remained tight,
with both import activity and output rather muted. At the same time, recyclate
notations were still playing catch-up with the rises that occurred in the virgin
market for the last few weeks and months.


All in all, the current situation means PET prices will once again take their
cue from cost developments in June. Coupled with a firmer euro, weakening prices
in Asia could result in an import revival. Still, in the last week of May
reports emerged about an FM in the UK, which would keep availability tight.
Suppliers, for their part, will try to make up for the margin losses they
suffered in May. Against this backdrop, it is quite likely that notations will
rise, at least slightly.

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