Notations explode / Some supply bottlenecks take on dramatic proportions / Cost development no longer plays a role for polyolefins / PS follows SM rise / Further hikes in May
PE: "Nothing short of catastrophic" was the way in which one
player PIE spoke to aptly described the supply situation on the European PE
market in April. The numerous restrictions caused by FMs, coupled with
production cutbacks caused by the shortage of ethylene as well as outages and
maintenance turnarounds left enormous gaps in producers' stocks. Nevertheless,
the price level initially remained too low to arouse the interest of importers.
The cost factor - the ethylene contract had risen by EUR 55/t - played no role
at all, as no buyer was able to escape triple-digit rises. Depending on the
previous price level, some hikes even exceeded EUR 200/t.
All signs point to further rises in May. Although the monthly ethylene
contract has added "only EUR 80/t, producers are once again calling for up to
EUR 200/t, which - if they succeed - would take notations to record levels.
While availability will likely remain tight in the coming weeks, the situation
should slowly start to improve. Record margins offer a strong incentive for
producers to ramp up production, and April's price level has once again become
attractive to importers, too. There have already been reports about shipments
making their way to Europe from North America and the Middle East, although they
are unlikely to arrive before June. This means that notations will likely
increase by triple digits again in May, even if the rises could fall short of
those seen in April.
PP: After a dramatic turnaround in March, prices virtually
exploded in April. The main factor behind the increases for standard material
was not the C3 reference contract, which rose by only EUR 55/t, but rather the
tight market, which led to polymer price hikes up to EUR 200/t and in some cases
even more. By contrast, compounds prices remained below the general cost rise as
a result of their being indexed to C3. The spread between high-end standard PP
and engineering compounds narrowed unusually.
The price of standard grades is expected to rise by triple digits in May.
Compounds will most likely follow the C3 cost rise of EUR 75/t. For independent
compounders who buy base PP the air is becoming dangerously thin.
Nevertheless, it looks like the current market situation could turn around in
May. For one, the tightness should ease as the attractive margins European
producers are now seeing provide an impetus to ramp up production. In North
America, PP notations fell again last month, making exports to Europe
increasingly attractive to producers there. The higher European prices will rise
in the first third of the month, the more imports could arrive. This means that
the price upswing could peak within the near future.
PVC: Having started the month with calls for triple-digit
hikes, European PVC producers throughout April steadfastly held on to their goal
of lifting their margins. As the month wore on, their efforts were increasingly
backed by ever tightening availability. In the final tally, the hikes were quite
heterogeneous, with the extent varying depending on the region, previous level
and the contract's timing. The cost of PVC base material could rise by an
average EUR 75/t and the price of blends and paste grades could increase by the
Notations are expected to increase further in May. The monthly ethylene
contract was fixed EUR 80/t higher, and the FM announcement for material from
Wilhelmshaven / Germany is keeping availability tight, even if the servicing of
another plant has now been wrapped up. Producers' calls currently reach up to
EUR 120/t, and depending on previous price levels and future developments, they
might even succeed at gaining the full amount.
Styrenics: Those who thought March's price increases were
excessive were dealt another blow in April as notations continued to climb. The
SM reference contract skyrocketed by EUR 300/t, and most producers swiftly
passed on the full cost rise. They were aided by tight availability of all
styrenics, as a result of which processors focused on securing volumes rather
than on limiting their costs. Following the increases of the last two months -
for normal PS grades the hikes have come to EUR 480/t - the price of PS, ABS and
EPS packaging materials has reached a level last seen in autumn 2013.
Yet it still looks like there is more to come. May's SM contract rose by
another EUR 20/t and initial announcements indicate that producers plan on
passing on at least this latest cost rise. Processors will have little choice
but to accept these demands if they want to secure the necessary volumes. "It's
a seller´s market," was the sentiment expressed by most players PIE spoke
However, the high price levels are beginning to take a toll on many
processors, most of which are unable to pass on the full extent of the recent
cost explosion. As a result, many of them are hoping for a turnaround in June.
The recent rise in oil and benzene prices, however, could lead to smaller
reductions, that is, if prices start falling at all.
PET: Following the course set in the preceding month,
European PET notations continued to make gains in April, as producers were able
to push through rises exceeding the cost increase. European manufacturers
relished in the fact that for the first time in several years they succeeded at
lifting their margins to what they consider to be an acceptable level. The main
reason they were able to do so is the euro's weakness, which has caused a
previously steady stream of imports to dry up. As a result, availability at the
start of the bottling season has declined to the volumes turned out by the
rather muted output of European production lines. The global cost rise also
played a role, as PET prices in North America and Asia began pointing upward,
By mid-month, PET recyclate prices also started showing first signs of
responding to March's primary market rises. This upward trend is likely to last
into May - after all, the dearth of imports coupled with an ongoing cost
increase at a time of rising demand are all signs that point to further
increases in virgin PET prices.