Rises for polyolefins and PVC slightly exceed the cost increase / PET prices firm / PS follows styrene´s downward trend / Cost increase will drive almost all notations up in July
PE: After the ethylene contract in October had been carried
over unchanged at its September rate, producers submitted calls for hikes of up
to EUR 30/t for all PE products as a statement of their clear intention to halt
the feared price erosion. At the same time, they implemented various measures to
keep the supply of materials as low as possible. The accompanying attempt to
exploit the spectacular cracker outage at the Dutch site of Moerdijk in order to
fire fears of a shortage was relatively ineffective. At the latest by mid-month,
it became clear that there would not be any real bottlenecks. On the contrary,
spot market prices for ethylene began to crumble again, causing buyers to hold
back on their ordering activity in expectation of price reductions in November.
Consequently, despite a number of export activities, prices for all LDPE grades
rolled over. With the standard LLDPE and HDPE products, on the other hand,
suppliers were at least able to eliminate some of the particularly low prices as
these grades are more dependent on the rather sluggish inflow of Middle East
The likelihood is that prices will fall substantially in November.
The C2 contract reference price was down EUR 90/t compared with October, and
this will set the bar for all PE materials, especially as some producers have
already indicated their willingness to pass on the cost reduction. With the
materials exposed to imports, however, the price cuts could be a little less
acute, also because the cost argument does not play such a large role for
non-European production. The tendency to a slowdown in customary trading because
of the weak euro and higher customs duties will also put a damper on the price
slide. On the other hand, grades such as LDPE, higher-quality LLDPE (C6/C8) and
bimodal HDPE, which dominate European production, are likely to bear the full
brunt of the declining costs. The only possibility of the price decline being
limited is if, despite the approaching year-end, buyers decide to replenish
stocks in view of the low capital costs.
PP: Strong export demand enabled European PP producers to
achieve a rollover for standard homopolymer injection moulding grades in
October. On average, all other standard products shed around EUR 10/t, due to
sluggish demand. PP engineering compounds remained stable, as did feedstock
prices. For the most part, supply and demand showed little change. Because of
the tightness of starting material hexene, more homopolymer than copolymer was
produced, but most of the overhang could be exported.
The November propylene
contract declined sharply, by EUR 90/t, and this will undoubtedly have
substantial repercussions for all PP grades. In view of the pressure on
notations from all sides, the only uncertainty is how much of the price relief
producers will have to pass on. The price fall will push indexed contracts down
two notches, and this will surely set the pace for the rest of the market. It
seems possible that the lower prices could trigger inventory building. Capital
costs are rock bottom, and this should take some of the sting out of the effect
on working capital.
PVC: Although October's ethylene contract rolled over,
producers of both PVC base and paste grades had to grant their customers slight
rebates to kick-start order activity. Their efforts met with quite some success,
not least since several application sectors ordered surprisingly well.
Nevertheless, the margins of base material producers especially continued to
suffer. The drop in additives prices - including for titanium dioxide,
stabilisers, modifiers and plasticisers - meant the declines in compounds prices
exceeded the fall in base material costs.
In November, prices across the entire PVC range are likely to decline. The
monthly ethylene contract fell by EUR 90/t, bringing the proportionate decline
for PVC to EUR 45/t. Processors will insist that producers pass on the entire
decline, which as a result of the ongoing downward trend in additive costs could
end up even greater for compounds. The higher the rebates offered by base
material producers, the more likely it is that November will see another surge
in orders. Even though the year is drawing to a close, low working capital
financing, bonus awards and low procurement costs mean stock-building activities
even at this time are no longer considered taboo.
PS: In October, supply and demand for EPS and ABS were in
balance, so that production costs remained stable. As a result, prices rolled
over. PS gave way slightly, as the trend toward oversupply made its influence
felt. The outage at an SM/PO plant at Moerdijk in The Netherlands did not lead
to supply bottlenecks as initially feared.
With the rollover of the styrene reference contract, only minor changes in
price levels are expected in November, but as the oversupply situation is likely
to continue, PS could deteriorate somewhat further. ABS appears to be pointing
clearly downward, as butadiene prices have fallen, and ACN appears headed for a
PET: As expected, European PET prices continued to fall in
October, with producers granting declines of EUR 15-25/t. Despite some
controversy, the PX contract was fixed at a weak rollover even though the
significantly oversupplied Asian market sent spot prices into a tail dive and
MEG, too, pointed down. By mid-month, regrind prices, too, finally showed the
first signs of reaction to the declines in the virgin material market.
Looking ahead, all signs point towards further declines, as PET notations pay
tribute to the rising overcapacities in Europe and elsewhere in the world, in
particular in Asia. The extent of the decline will depend largely on the PX
contract, which still has to be fixed. Irrespective of this, producers appear to
have started shelving plans for capacity expansions - a trend that is bound to
affect recyclate, too. In the long run, the downward slide could even start
picking up speed.