Notations rise on a broad front and exceed costs / Demand in summer holiday season driven by pre-buying / Substantial increases likely in September

In August, most European buyers of standard thermoplastics had to accept price increases slightly above the cost rise for the respective monomer, which was EUR 40/t for ethylene, EUR 50/t for propylene and EUR 47/t for styrene. Producers were able to bask in the sunshine of their success, leveraging the widespread production cutbacks to achieve small to moderate margin gains. While small and medium-sized converters tended to hold back, larger buyers seized the chances to stock up in advance of expected further price increases.

The fairly tight supply situation due to the output cuts of previous months was worsened by outages and maintenance turnarounds at a number of European crackers. As demand in many market segments was normal and even picked up towards the end of the month, availability tightened.

Due to the crises in the Middle East, especially the civil war in Syria, petrochemical prices rose significantly at the end of August. At press time, this had led to rises of EUR 60/t for propylene and EUR 85/t for styrene. The ethylene contract was fixed on 3 September at EUR 1,260/t following protracted negotiations. Many market players had feared that the general uncertainty would trigger a triple-digit rise.

In September, polymer production is likely to continue on a low flame, and not much import activity is expected. Especially as Italy and France will be returning from their summer break, and business in NWE generally picks up in September, supply is likely to be tight even if a good deal of the potential increased in demand was absorbed by the August pre-buying activities. All indicators point to further substantial polymer price increases on a broad front, possibly well in excess of the monomer cost increases.

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