Numerous producers fail to pass on cost rise / Demand muted as a result of numerous bank holidays / Buyers hold back / Jine hikes will likely end up being of a moderate nature
PE: However much they tried, most European PE producers were
unable in May to pass on the full increase in the ethylene reference price.
Depending on the market situation, some hikes did go through - as was the case
for select LDPE grades. On the whole, however, the abundance of import
alternatives quashed any attempts at increases. Apart from that, demand was
rather muted as a result of the many bank holidays and bridging days, which
coincided with buyers´ tendency to hold back on orders. All considered, most
producers ended the month with a small margin loss.
In June, producers will naturally want to turn the situation in their favour
and will try to factor in at least the latest rise in the ethylene reference
price. Their success will probably be limited to a few specific cases, however,
and especially for material linked to French production lines. Taking a wider
bird's eye perspective, all signs currently point towards a rollover in June,
despite it being a long working month.
PP: The European PP market showed differentiated
developments in May. For lower-end products that compete with imports, producers
had difficulties passing along in full even the modest rise in the propylene
reference contract. Due to supply limitations linked to the strikes in France,
notations for the higher-end copo grades firmed, and in some cases the hikes
exceeded the feedstock reference price. Compounds saw little price movement due
to the stability of indexed contracts.
In June, most producers will want to pass on the renewed increase in the
propylene reference contract but will face rising opposition from their
customers. Depending on which way the market moves, price movements in June
could be in line with May.
For the compound segment, June will not be a dull month. From July onward,
the market leader plans to switch the reference price index for compounds from
C3 to standard PP - a move that is causing considerable anxiety in the market.
Negotiations this month will reflect this upcoming shift, and it is hard to
predict what the outcome will be.
PVC: European PVC base material producers were unable to
push through in full their calls for hikes in May. However, the market leader's
stubborn attitude did allow them to make moderate margin gains exceeding the
usual 50% proportionate share of the ethylene contract rise. The increase in
notations for unplasticised PVC exceeded that of PVC base material, having been
propelled by the renewed rise in titanium dioxide costs. The price of flexible
blends, by contrast, reflected the increase in matrix material costs, while
notations for PVC paste grades took their cue from the ethylene reference
The escalation in the strikes in France at the end of the month has the
European PVC front increasingly worried. Europe's second largest PVC producing
country looks poised for significant production downtimes. Given the latest rise
in the monthly ethylene contract, albeit of a slightly more moderate nature, and
the expectation that demand will pick up in the long production month of June,
PVC notations will likely continue pointing up.
Styrenics: PS prices moved sideways in May, following the
rollover of the styrene reference contract. EPS prices also largely remained
unchanged, even though in the second half of the month weak demand forced
producers to make slight concessions here and there. Although ABS prices rose
slightly, due to strong competition from Asia the increase rarely made up for
the higher composite costs.
Demand for styrenics was dampened by the many bank holidays and bridging days
in May and by processors' hopes for further price reductions in June. However,
any expectations of rebates proved illusory. The ongoing strikes in France and
the resulting tightening of availability drove SM spot prices up sharply at the
end of the month. In the wake of these developments, the SM reference contract
for June added EUR 60/t and styrenics prices will most likely follow suit.
PET: The European PET markets constituted a highly divergent
picture in May. While the price of both extremely small and very large orders
rose slightly, the decline in notations in the Far East actually pulled down
regular mid-sized orders across Europe, which are much more susceptible to
import alternatives. On the PET recyclate front, the cost of clear, food-contact
approved grades followed the earlier increases in virgin material notations.
There is no clear discernible trend for June, making it very difficult to
predict which way prices will turn in the coming weeks. On the whole, the market
remains structurally oversupplied, even as several brand-new plants have been
completed on Europe's outskirts but have yet to start operations. Apart from
that, plenty of material is arriving from Asia. On the other hand, costs
continue to point up and June is a month with a lot of working days, promising
strong order activity. In this kind of scenario, the old seasonal adage applies:
The sunnier it will be in early summer, the higher PET prices will climb.