Feedstocks determine the decreases in November / Attempts to improve margins unsuccessful / Stability at most is expected in December / Subdued demand will define the conditions
PE: In parallel with C2, Western European prices for all the PE grades covered by PIE’s report were down last month – by an average of EUR 30/t. A number of lower spot offers on the market had only a minor influence on the contract prices because many buyers want to take advantage of the end-of-year bonuses. An increased number of spot offers – especially for higher-grade metallocene types from the US – put significant pressure on LLD film prices. Although business trended toward normalisation, sales of most PE materials were lingering at the bottom end of producers’ expectations. There was weak demand due to uncertainty after the spate of criticisms of plastics and many new legal regulations. Demand for injection moulding grades was somewhat more robust. With HD blow moulding grades, the US-China trade war led to an influx of imports to Europe from North America. With the overall market tending longer, the EUR 10/t increase in the C2 reference price should ensure stability at most. A rollover is probable for most grades. One US producer is planning to switch off European LLD film capacities in order to at least take off some of the pressure. This is initially not likely to have any more than a minor effect. In the second half of December, producers could then begin slowing things down again as soon as converters stop ordering and begin their winter break. There could also be a considerable influx of LDPE film material from the US at the beginning of January 2020.
PP: For the most part, European polypropylene producers in November had little choice but to pay homage to the decline in the C3 reference contract and adjust PP selling prices to match. Due to the fact the demand was well below average, despite a slight improvement against October, even output reductions were not enough to keep the market in balance. It was a buyer’s market, and each was free to decide whom to buy from. In a similar market environment, the C3 price fall was passed seamlessly through to buyers of PP compounds. As converters’ inventories remain full, demand threatens to come to a screeching halt in December. Many converters, in particular those that directly or indirectly supply the automotive sector, may well end production after the second week of the month while at the same time extending their plant holidays beyond the end of 2019. OEMs, too, are likely to shut up shop for an extended period. The standstill in fact will affect the entire supply chain, including compounds, and polymer producers also will operate a low flame. But even with output levels short across the board, downward price pressure will continue.
PVC: In November, Europe’s PVC producers initially planned to keep the cost reduction in the ethylene component for themselves by agreeing a rollover, thus enabling them to improve their margins somewhat. Despite a relatively balanced market with demand running at the normal level, they ultimately failed to achieve this, however. All those involved thus agreed on the usual scenario of passing on 50% of the reduction in the ethylene reference. This then traversed the added value stages of the material chain as all other impulses remained too weak. The pro-rata ethylene costs rose EUR 5/t. However, the market is trending liquid, which should hamper a passing on of costs. Processors are generally planning very early and extended Christmas breaks, while suppliers are countering this with production cutbacks and export plans.
Styrenics: In Western Europe, styrenics prices continued to decline in November. These followed the renewed decrease of the SM reference. Producers of PS, EPS and ABS tried – mostly in vain – to retain part of the cost reduction, but their efforts to bolster emaciated margins failed due to the oversupply in all styrenics. The situation worsened in particular for PS injection moulding materials and EPS insulating materials, where some suppliers accepted discounts far in excess of the SM reduction in order to reduce their inventories. The basic trend will not change in the next few weeks, and the way towards further price reductions has been mapped out – the styrene reference declined by EUR 47/t in December and styrenics notations are sure to follow in view of the continuing weak demand. With an eye on the year-end balance, many processors are only buying essential volumes to keep their inventories as low as possible.
PET: Although the PX reference was slightly firmer at the end of October, the European PET market was not really concerned about pursuing cost discussions in November 2019. With demand remaining subdued, spot prices approached the EUR 800/t mark under the additional pressure of attractive import offers. Very high volumes are also to be found in this same range, further widening the gap with the small volumes subject to monthly contracts that are covered in the PIE reports, particularly since the reductions here tended to be more moderate. All in all, the PET market has evidently returned to the oversupply mode that has basically prevailed for many years before consolidation took hold in 2017 and, coupled with China’s ban on the import of PET waste in 2018, temporarily brought about an exceptional situation. Irrespective of what will presumably be a far from dynamic development in costs, further reductions are thus expected for December, particularly since demand remains very weak.