Cost developments mostly passed on / Polyolefins and PVC point down / Styrenics in steep upward flight / Moderate rise for PET / Producers planning January price offensive
PE: There was little discussion among European PE market players in December, and in most instances the decline in the ethylene contract was passed on in full. On some occasions, the cuts were a little smaller - as with HD blow moulding - or a little higher - as with LLD (C4). In most cases, however, notations reflected the cost decline. Availability trended slightly long as a result of the bank holidays.
Producers will step up their game in January. Not only do they plan to factor in the latest increase in the ethylene reference price, they are also resolved to recover some of their lost margins. The creeping margin erosion of 2016 is to be put to an end, suppliers agree. The big question is not whether they will succeed at this, but how much they will manage to obtain. If the upward price trend continues, customers could start building up stocks, which would push notations up even further.
PP: Almost all attempts by producers to hold rebates to less than their cost relief in December 2016 came to naught. The market was too balanced, despite production levels being adapted to the slack end-of-year demand in the short working month of December. Compounds producers also passed on their entire cost relief without much ado.
Headed into January, producers are determined to pass on not only their higher costs. They are also calling for structural adjustments, accompanied by plans to curb or cease output of materials with weaker margins. Although it remains to be seen how much they will be able to achieve in the end, there is little doubt that the trend is pointing upward.
For compounds, too, producers will pass on their higher costs. The new system of indexing notations to standard PP could lead to stronger than usual price momentum.
PVC: Despite putting up firm resistance, European suppliers of most PVC grades ultimately had to bow to the market reality in December and lower their prices. Their goal of improving margins proved a pipe dream. It was entirely different for flexible compounds, however, as the shortage in global plasticiser availability took on dramatic proportions at times. In the final tally, notations for PVC (P) compounds even rose slightly.
The increase in the latest ethylene reference contract is expected to pull the entire PVC portfolio up in January, with disproportionate increases likely for flexible compounds.
Styrenics: Styrenics prices skyrocketed in December following the significant increase in the SM contract, with PS and EPS scoring triple-digit hikes. Although the uptrend for ABS was limited by the rollover for butadiene and the decline in the ACN contract, notations still reached their highest point of the year in December 2016. The significant price increases further diminished processors' buying mood at a time when many of them were anyhow trying to keep stock levels low for their end-of-year balance sheets.
Yet, the final word on the uptrend will not have been said in December. Already there are signs of another increase for January's SM contract, which will invariably take styrenics prices up with it. The widely expected rise will be even steeper for ABS following the EUR 140/t hike in butadiene.
PET: European PET prices rose slightly in December 2016, with the hikes ranging from EUR 10/t for medium-sized orders to EUR 45/t for smaller lots, yielding a rather heterogeneous price picture. Demand was muted, as expected. The increases were set against an earlier uptrend in Asian notations across the entire polyester chain. As a result of the weakening euro - or, more accurately speaking, the strengthening USD - competitively priced imported material quickly disappeared, allowing European suppliers to pass on their moderate cost increases. Anything beyond that, however, was not possible.
Headed into January, costs continue to trend up, which could lead PET notations to increase in the first month of 2017 as well. The price of Asian material is not low enough to prevent producers from trying to factor in any potential cost increases.