Polyolefin producers secure margin gains/ PVC and styrenics also profitable for suppliers / PET notations fail to reach full cost rise / Upward trend likely to weaken considerably in May
PE: Many European PE producers - but by no means all -
managed to gain slight margin improvements in April. One notable exception was
EVA copolymer, availability of which was very short due to the outage of a large
production plant. As a result, its price rose by triple digits. Notations for
most of the remaining PE portfolio rose by slightly more than the EUR 60/t
increase in April's ethylene reference price. Basic LLDPE (C4) grades, on the
other hand, were subject to slightly smaller increases. Most of the latter
material was imported. Apart from that, availability of most PE types trended a
little tighter, which allowed suppliers to grease their margins.
Come May, there will likely be several heated price battles over a number of
PE grades. Most buyers do not see why they should be forced once again to pay in
full the latest EUR 40/t rise in the ethylene reference price. The efforts made
last year to decouple the price of PE from the feedstock contract should also
work in their favour, they argue. In most cases, it will be a question of
finding the right market balance. Buyers will in most cases attempt to lower
producers´ proposed increases. However, where EVA is concerned, they will not
meet with any success. The shock that came after the outage in Oberhausen /
Germany simply sits too deep.
PP: In April, PP producers quickly recouped the slight
margin deterioration they suffered in March. Some maintenance turnarounds,
several of them coming unexpectedly, narrowed supply substantially while at the
same time import activity was still relatively weak. As the end markets ordered
briskly, many converters did also, even though quite a few of them had stocked
up only fairly recently. This tightened supply and allowed producers to push
through hikes slightly above the EUR 60/t increase in the propylene reference
For compounds, the change in the C3 reference contract was, as usual, the
base for price movements. Concurrently, however, producers continued to pursue
their medium-term strategy of achieving "structural adjustments. From their
standpoint, the price gap between compounds and commodities is too narrow, due
to the substantial margin improvements achieved for the standard grades last
year. The aim is to achieve margin improvements for compounds similar to those
already seen for standard material, and compounders are unlikely to rest until
they have reached, or nearly reached, their goal.
In May, price movements for standard PP are likely to be less dynamic. The
impetus for increases is not especially strong in view of the rise of only EUR
15/t in the propylene reference contract. Supply is improving, and more imports
are entering in the market, albeit at higher prices. Against this backdrop, any
polymer price hikes will likely be minor. The same should apply to compounds,
although the relatively robust demand will give producers a chance to push
through additional components of their structural adjustment scheme - out of
turn, so to speak.
PVC: S-PVC base material producers in April managed to
achieve the gains they had been so desperately seeking in the preceding months.
The resultant rise in margins was set against the backdrop of the EUR 60/t
increase in the monthly ethylene contract. Although suppliers were unable to
meet the goals they had announced at the onset of the month, they were able to
look back on April as a satisfying month. Buyers of rigid PVC blends had to pay
even more than the rise in matrix material costs, as the price of other
additives, prime among them titanium dioxide, also rose quite markedly. It was
much more quiet on the flexible blends front. Suppliers of E-PVC were once again
content with the small margin gains they managed to push through, which
resembled those of the preceding month.
Availability trended tighter in a number of segments, mostly as a result of
maintenance turnarounds. At the same time, demand from the construction sector
in particular picked up significantly. It appears that many players had held
back on their orders ahead of the Easter holidays. As a result, the season got
off to a sudden and strong start.
Notations are expected to rise across a broad front in May. The monthly
ethylene contract was fixed EUR 40/t higher, and availability is becoming tight
at a time when demand is picking up. Against this backdrop, it would be
surprising if producers failed to squeeze out additional margin gains.
Styrenics: The highly volatile cost development continued to
keep the European styrenics market in its grasp in April 2016. After notations
had risen by almost triple digits in March, the renewed EUR 95/t rise in April's
SM contract brought on more of the same. Tight feedstock availability also
resulted in lower output at polymerisation facilities. On the whole, however,
the market remained quite balanced - the high price level meant many buyers
restricted their purchases to the minimum. Order for construction applications
were strong, as this particular segment got off to a lively start once the
Easter holidays came to an end. A number of producers succeeded at pushing
through triple-digit hikes, including for ABS, which reflected not only the
increase in styrene, but also rising butadiene and ACN costs.
The rollover in the styrene contract will set the tone for May. The feedstock
cost trend could even result in slight declines in those applications where
demand is not exactly booming. All considered, however, prices will most likely
PET: European PET producers in April had to once again
concede the slight margins gains they had achieved in March. Since availability
was not as tight as initially feared, suppliers were unable to pass on the
entire cost increase. In general, the price of bulk volumes rose by slightly
more than that of the small- to medium-sized orders reflected by the PIE range -
in part because the pressure from imports and spot material was not as strong.
Although imports from Asia started to thin out from mid-month onward - they were
redirected to the US, where notations started pointing up - availability still
sufficed to meet demand.
Even if demand is expected to pick up in May, as it usually does at this time
of year, the overall market balance will likely remain the same. Absent any
strong impulses from the feedstock chains, it is highly unlikely that suppliers
will manage to lift notations, especially for small-scale orders. Of course, if
a heatwave should hit Europe, demand for bottles would rise beyond the current
expectations. As for large-scale, contracted volumes, which are difficult to
replace, prices could rise once again in May.