05/11/2018

PIE - Polymer Price Reports

Standard Thermoplastics April 2018

PE tends weaker / Passing on of costs fails with PP / PVC slightly stronger / PS prices slide along with SM / Scarce PET jumps unexpectedly higher / Higher olefin costs in May

PE: The price increases for European PE materials in April were predominantly confined to types for which buyers here were competing with buyers from abroad. The pipe segment, bolstered by the lively demand from India, registered a double-digit euro increase, while the HD injection moulding grades competed with the Chinese market in the lower end of the price range. The situation is different with the film grades. Influenced by the surplus of LDPE, there were reports of price cuts over a wide range despite the increase in the ethylene reference. Rollovers dominated with injection moulding material, HD blow moulding grades and EVA. Converters' tactical purchasing behaviour generally prevented producers from passing on the proportionate costs.

In May, it will be difficult to avert price hikes on a broad front in view of the increased production costs. Suppliers face the problem of high naphtha notations combined with a falling euro. The ethylene reference for May was agreed at EUR 20/t higher. It is safe to assume that producers will call for significant increases from their customers in order to prevent any margin losses. On the other hand, demand is likely to continue comparatively weak due to the many bank holidays, so that margin concessions are likely to be the exception rather than the rule. Nevertheless, buyers are expected to call off material in line with their contract agreements. A factoring in of the proportionate costs could therefore be in store.

PP: Some PP producers kicked off April with announcements of price increases that proved difficult to pass on. Any hikes pushed through were at the bottom of the range. In most cases, not even higher production costs could be passed through as order volume was slack, due to the Easter holidays. Compounds generally rolled over.

May with its many bank holidays is unlikely to see any revival of demand. Yet producers may still announce price increases in the hope that they can pass on not only the EUR 25/t increase in the C3 contract but also recoup margins that most forfeited in April. Producers of compounds at least have good chances of achieving at least part of their target.

PVC: After the first two months of the year were characterised by brisk demand, the situation has now returned to normal. As a result, PVC producers were unable to push through their sought-after hikes of up to EUR 20/t. On the European market for base products, the share accounted for by ethylene costs was passed on in most cases, at EUR 5/t. The market situation for additives has generally calmed down in the second quarter. Neither titanium dioxide nor plasticisers dictated the direction in which prices moved. Hence, for PVC compounds, it was primarily the momentum of the base product that made its mark. Demand for paste grades is still brisk but, in this segment too, it was not generally possible to up the price by more than the pro-rata costs.

In May too, producers see themselves confronted with an increased ethylene reference price. However, given that the market is balanced overall, producers will have difficulty in improving their margins. The situation with paste grades is a different one. With demand running high - including from Eastern Europe - these may experience a disproportionately high increase.

Styrenics: The significant cost reduction of SM by EUR 125/t in April has put an end to an upward trend that has lasted for four months. Styrenics prices have largely followed the cost reduction, so that PS and EPS have recorded three-digit reductions across the board. The discounts on ABS, however, were moderated by increasing costs for butadiene, which went up by EUR 75/t, and for ACN, which increased by EUR 5/t.

Consequently, processors were rather reluctant buyers in April because they were expecting another SM cost reduction and thus decreasing prices for styrenics. Apparently, they were right. After the decrease of the SM reference contract in May by EUR 40/t, the same is likely to happen to PS and EPS prices. ABS prices, on the other hand, are counterbalanced by a EUR 60/t premium on butadiene, and while the price of ACN was not yet available at press time, it is likely to also go up - all in all, this will result in stable prices or, at most, a weak rollover.

PET: April saw the spread of hikes throughout the European PET market. Individual market niches had already had to accept increases over the previous months, especially for longer-running contracts with unusual frequencies. And now the market as a whole was affected. What had previously been a more or less balanced market switched to short supply after Easter. Not only were there supply restrictions for the feedstock PTA, but demand skyrocketed in parallel on account of the exceptionally hot weather that prevailed in some cases. This prompted a rapid increase in prices.

Midway through the month, increases emerged for regrind. This was less a case of following suit and far more a direct reaction to the market situation. Clear secondary material has already risen to EUR 1,100/t or more.

Further increases could result in May. Although the operators have announced that the disruptions for PTA will have been resolved by mid-May at the latest, it will be some time until the pipelines are full. No help is in sight from the import world on account of the restructuring of the Chinese market. Purchasers have become more cautious and are doubtless intent on keeping their raw material warehouses full, with an eye to the upcoming season. If hot spells like those in April occur in May, this could be accompanied by acute demand too.

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