Most producers manage only cost pass-through / Demand still sluggish / Prices still pointing upward / Margin improvement is the watchword for February
PE: European PE producers started the year in optimistic mood. Their calls for price increases also included an improvement in margins, but in the vast majority of cases, producers went unrewarded. Generally speaking, the passing on of the higher costs was the measure of all things. The main reason for their lack of success was the subdued demand, although this was not usually caused by the end markets, but by converters´ well-filled stocks. The ethylene reference price for February was up again, this time by EUR 35/t. In February, in combination with converters´ decreasing stocks, the lively demand from the end markets should boost business. The market situation is tending tight, which could in turn give producers an opportunity to raise margins.
PP: All efforts by European PP producers to improve their margins bore little fruit. The sluggish demand allowed them to do no more than pass on the increase in the propylene reference contract. Margins are still in the EUR 500-600/t range, but producers are worried about the creeping erosion. Both supply and demand were slow to gather momentum in the first half of the month, but normalised in the second half. Notations for compounds rose in line with the respective matrix material. In February, the producers are determined to not only stop the price erosion, but turn it around. The monthly C3 contract added another EUR 45/t. European plants are being run at capacity and imports have slackened. In parallel, the North American PP market has turned around, and hikes have reached triple-digit dimensions, which could offer attractive export opportunities. Demand can be expected to pick up in February. Could there be a better time to put price increases on the European agenda?.
PVC: Europe's PVC suppliers started 2017 with ambitious resolutions to improve their margins. This they failed to achieve, however. Only the increased cost of ethylene was passed on. Although export opportunities opened up for Turkey and the Far East, demand within Europe remained too weak to permit anything further, despite restocking effects. Rigid PVC compounds were affected not only by matrix costs but also by the increasing titanium dioxide notations. The C2 contract rose once again in February. PVC producers are also still aiming to improve their margins, and with the export windows that continue to be available plus the expected pickup in demand, they might be able to at least partially realise their aims. Compounds and blends will not only be affected by the continuing upwards trend in titanium dioxide - the C4 hike in plasticisers will have a notable impact too.
Styrenics: The steep rise in styrenics prices continued in January. The renewed increase in the SM reference contract, this time by EUR 105/t, propelled PS, EPS and ABS still higher. In direct dealings with customers, many producers tried to pass on almost their entire cost increase, while distributors and traders showed more flexibility. This rally is not yet over. On the contrary, to converters' dismay, the February SM contract hit a new record high. The EUR 260/t increase will drive ABS to historic levels, due not least to the dramatic EUR 460/t increase in notations for the additive butadiene. PS prices are also likely to pass the previous peak seen in September 2013, while EPS will at least come close to its all-time high. To put it mildly, converters are more than a little unhappy with the current situation.
PET: In January 2017 European PET prices are essentially rising in line with the cost mix. The January reference contract for PX rose by EUR 55 to 60/t, and the contract for MEG by EUR 150/t. Passing on these increases posed no major problems, since Asian imports have ceased to be attractive. The occasional margin improvements achieved by suppliers remained within moderate limits. Regrind experienced a slight upwards trend midway through the month already. In the second half of the month, material sales were considerably above the customary level for January, as warehouses were stocked up to a greater extent to protect against the continuing surge in global oil and aromatics chains. Price hikes in Asia over the preceding weeks meant imports failed to have their usual corrective impact on European supplies now that their price has rendered them unattractive. Little is set to change worldwide in the basic market conditions. Petrochemicals are still showing signs of upheaval. Further rises are expected for PX and MEG, and these will rapidly be picked up by PET prices. Regrind ought also to be increasingly affected by the upwards trend.