PIE - Polymerprice Reports

Standard Thermoplastics February 2015

Producers manage to pocket some of the cost relief / Suppliers´ order stops signal turnaround by mid-month / Rebound in oil notation will likely result in increases in March

PE: After four consecutive months of decline, European PE
notations bottomed out in February. Although producers passed on a significant
share of the C2 cost reduction in their regular business, many of them stopped
taking orders at the end of the first week, thereby raising the price of
transactions made later in the month. Suppliers of niche grades, including
several HDPE and some LLDPE types, only granted concessions much lower than the
actual cost reduction. The run on material early in the month, as it became
evident that prices were bottoming out, was put to an abrupt end by producers´
refusal to accept orders for additional quantities. Now that the triple-digit
rise in the monthly ethylene contract has proved true producers' speculations on
rising notations, prices will rise across the board in March. In fact, suppliers
have already announced hikes of up to EUR 160/t for tighter niche materials. For
the first time in many months, imports from Iran could help limit the extent of
the rise.

PP: European PP producers passed on almost all of their
feedstock price relief to regular customers in February. Still, most could
improve their margins for the fourth consecutive month. After only a week,
however, when it looked as if the price downswing had bottomed out and amid a
virtual onslaught of requests, most suppliers stopped taking orders. Top-up
orders cost more. As expected, many PP compounds contracts indexed to C3 saw
noticeable concessions, but the buoyant demand kept notations from crumbling
further. In March, all PP grades will see hikes, with producers seeking to add a
little more than the EUR 105/t rise in the propylene contract. For compounds
used in durable goods applications such as automotive or electrical appliances,
prices for indexed contracts will bear the full brunt. For standard PP grades,
where margins are already high, producers could face opposition. As they did not
pass on all of their price relief, why should they insist on passing on all of
the increase, the argument goes.

PVC: Although European PVC suppliers were able to pocket a
small share of the decline in February´s ethylene contract, producers´ hopes for
larger gains in retroactively negotiated deals were quickly dealt a blow. Even
though both oil and naphtha prices firmed as the month wore on, converters were
able to squeeze their suppliers for double the concessions the latter had
originally been willing to make. Declining additive costs meant the fall was
steeper for rigid compounds and dry blends, while flexible PVC producers mostly
kept the declines in tune with the matrix material. The downtrend was also less
marked for E-PVC. Following the triple-digit increase in the monthly ethylene
contract, prices will definitely rise in March, and one producer has in fact
already called for a hike of EUR 100/t. It still remains to be seen whether this
call will be heeded. The odds that manufacturers will be able to improve their
margins, however, are quite high.

PS: The renewed decline in the SM reference contract pulled
styrenics prices down in February. However, it increasingly looks like notations
have bottomed out. In anticipation of rising prices, many processors wanted to
order beyond their actual needs, but were quickly thwarted by producers. ABS and
PS suppliers in particular closed their order books early. With strong demand
strengthening their negotiating position, they were able to pass on only a
fraction of the cost relief. EPS producers were also able to improve their
margins, but to a lesser extent than with PS and ABS due to it being the
offseason for construction activities. After months of - at times steep -
descent, styrenics prices are expected to rise again in March. After a lot of
back and forth, one SM contract for March was fixed quite late and ended up
rising by a massive EUR 175/t.

PET: The European PET market was a mixed bag in February
2015. Players that had not been able to receive sufficient concessions earlier
now managed to secure moderate declines. On the whole, however, notations once
again rose slightly. By mid-month, firming upstream notations left at least a
psychological impact. Once news emerged that spot prices along the Asian
polyester chain were also pointing up, notations rose slightly. Recyclate
prices, by contrast, continued to decline even in mid-month. However, firming
virgin material notations could prompt a turnaround on the secondary front in
March, too. Primary market prices could firm in the last month of Q1, as both
feedstock and polymer producers will endeavour to reap the benefits of the
slight rise in both oil and naphtha. However, demand remains rather lacklustre.
As a result any potential increase will likely remain moderate.

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