Standard Thermoplastics October 2013: All notations slide downwards / Producers forced to pass on cost reductions / Buyer resistance / Price bottoming possible in November
Despite production cutbacks, there were hardly any bottlenecks in supply for the vast majority of standard thermoplastics on the European market in October. This was manifested in the continuing resistance to purchase on behalf of converters and their end markets. The situation was widely reflected in the declining price notations.
In October, most European PE producers offered customers price cuts of slightly less than the EUR 35/t reduction in the ethylene contract. Buyers of film grades, however, won slightly greater concessions toward the end of the month. Prices for injection moulding and blow moulding material were more closely in line with the monomer's movement. EVA producers trimmed prices proportionately to the ethylene content of the product. With few exceptions, such as for LDPE injection moulding grades and certain high-grade HDPE products, there was a slight surplus despite the continuing production cutbacks at European plants. Here, imports also played a role. Demand from the end markets remained subdued as prices were not yet low enough to generate buying interest. Convinced there was further room for declines, converters also refrained from building up inventory.
After the October propylene contract was fixed EUR 40/t lower against September, producers of standard PP grades passed on the cost relief to customers. As the supply side did not present a uniform front, however, some buyers won further concessions, grabbing up what was left after producer cutbacks. The lower C3 price was insufficient to substantially reduce prices for PP engineering compounds, where prices are often tied to the monomer. This influence kept freely agreed prices at distributors mostly stable. Darker talc-filled compounds though, for which there is more competition, saw some downward momentum.
With a EUR 92/t drop to EUR 1,450/t, the styrene monomer (SM) reference contract for October brought the feedstock's price rally to an end and pulled prices for styrenic polymers downward. PS producers were obliged to pass on the full scope of their cost relief, while EPS producers were able to hang onto some of it to bolster margins. The picture for ABS was mixed as butadiene and ACN also play a role in its cost mix. Some converters managed to nail down rebates exceeding the monomer decline, but others were unsuccessful. Demand for styrenics was lively as October began. Many converters had to refill as they had worked from September inventory, waiting for the rally to fizzle. However, for PS and ABS, momentum quickly receded as spot SM began to come off peak. In the hope of further price reductions in November, converters confined themselves to ordering the minimum needed. EPS buyers were an exception. They continued to order well as the building season was still in full swing. This tightened supply of the expandable type compared with the two other styrenic polymers.
Despite a slight dip in ethylene costs, S-PVC producers were unable to achieve the targeted rollover. In a largely balanced market with slight demand weaknesses, the monomer price decline had to be completely passed on. Due to moderately decreasing prices for plasticisers, flexible compounds moved in parallel, while rigid compounds and dry blends were affected solely by changes in the PVC matrix material price. Notations for high-priced PVC paste grades also moved down in line with the ethylene contract. There were few noteworthy restrictions on production. Demand proved to be largely robust, but with some regional weaknesses in the pipe systems segment.
Following the decline in feedstock costs, European PET prices also began to crumble in October. The downward trend continued across the entire chain as both production and demand remained muted. North American prices fell by roughly the same extent as in Europe, while declines were more pronounced in Asia. In the end, buyers had the last laugh, as the November ethylene contract lost a further EUR 30/t, and this will now form the basis for the monthly polymer negotiations. There are a number of indications that the downswing will bottom out soon, and if past experience is a guide this will stimulate the end markets.
Some major converters will keep buying with an eye to achieving their annual bonus, so price cuts should generally be fairly moderate and slightly below producers' cost relief.