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: Although the market tended tighter in June, European
polyethylene producers only managed to secure increases slightly above the EUR
10/t rise in the cost of ethylene. Only occasionally did they manage to push
through hikes of more than EUR 20/t. In the case of more readily available
products, including higher-grade LLDPE, manufacturers in fact could consider it
a success if they managed to pass on their higher costs. Caught in the grasp of
high-priced VAM, EVA notations added around EUR 30/t.

July will likely see substantial increases across a broad range. The EUR 50/t
increase in the monthly ethylene contract is simply too great to be ignored.
Producers should be able to pass on this extra cost and, depending on the market
situation, could even secure larger increases for certain products, including
LDPE, LLDPE (C4 film) and HDPE injection moulding material. It still remains to
be seen whether the high price level will encourage the arrival of imports. EVA
prices should receive further impetus now that VAM has stabilised.

PP: In June, the rise of only EUR 10/t in C3 prices clipped
standard PP producers' high-flying dreams of lifting notations by EUR 30/t. In
the month's final tally, regular orders saw gains of little more than the
production cost increase. The picture for top-up orders was a different one
altogether. Especially for the tighter homopolymer grades, buyers had to dig
deeper into their pockets.

Prices for PP compounds were propelled upward by rising propylene costs. The
third consecutive monthly increase for C3 pushed indexed contracts up to a new
level. Freely traded transactions for compounds quickly followed suit.
In
the long month of July (with 23 working days), additional upward momentum seems
assured, as producers of all PP grades will be seeking hikes of EUR 25/t. Even
if propylene's tightness has eased due to slackening demand in the wake of the
SM/PO outage at Moerdijk, the C3 contract notation rose once again, this time by
EUR 15/t. As two recent FMs are further limiting supply, of not only homopolymer
but also random grades, the market's real tightness in June will still be felt,
at least virtually, in July.

PVC: In June, too, European PVC producers only succeeded at
slightly improving their margins. They managed to net increases of about EUR
10/t, only EUR 5/t more than the proportionate ethylene cost rise. Manufacturers
of compound grades and paste qualities barely netted half of that, meaning they
only succeeded at recouping their costs. As a result, PVC producers - most of
whom are backward integrated into the chlorine chain - continue to feel the
pressure on their margins, exacerbated by the weak caustic soda market.

Prices will definitely rise in July. With their backs to the wall, PVC
producers will have to swallow their proportionate share - which amounts to
about half - of the EUR 50/t rise in the monthly ethylene contract. With the
market largely balanced, they will probably succeed at raising prices. Whether
they will manage to push through more than the cost increase, however, remains
to be seen.

PS: The decline in June's styrene monomer contract set the
direction for styrenics prices. As supply was long, many PS producers passed on
the full SM reduction of EUR 45/t. EPS producers, by contrast, could hold on to
more of their cost advantage. The ABS market, although also influenced by the SM
cost mix, danced to a slightly different tune. While producers of extrusion
grades tended to pass on the entire monomer decline, injection moulders managed
to pocket some of the difference.

With prices down on a broad front, converters seized their chance and
refilled inventories, thus inflating demand. EPS did not profit from the trend,
however. Here it seems increasingly clear that the strong development at year's
begin reflected the mild winter weather and not a general building boom.

June's lower prices gave converters a short, but merely temporary, break
from the general upward trend. In July, notations for all styrenics will be
pointing upward again, and this month's rise will be stronger than last month's
decline. Once again, notations for styrene monomer will set the pace. The July
SM reference contract saw an increase of EUR 82/t, thus soaring to its highest
level since October 2013.

PET: Notations for small and medium-sized European PET
orders rose slightly in June, as producers were able to pass on the full
increase in the monthly PX contract. Their efforts were backed by rising prices
across the Asian polyester chains, as a result of which import pressure eased
significantly. This in turn raised the impact of the cutbacks implemented by
European producers, especially at a time of slightly livelier demand. Producers
of rPET were also able to exploit the firming virgin prices, passing on the
increases they had been forced to swallow in May.

PET prices are expected to remain firm in July, too, with the market unlikely
to feel the impact of the new plants brought on stream in Belgium and Egypt just
yet. Asian and Middle Eastern producers have already called for hikes, which
should keep a lid on the pressure exerted by imports from these regions. As a
result, the European market should remain largely balanced, albeit at a low
level. In the long term, however, prices will fall victim to the global markets'
ongoing structural oversupply.

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