PIE - Polymer Price Reports

Standard thermoplastics August 2022

Weak demand, reduced production cause market uncertainty / Hoped-for revival in September yet to make appearance / More and more companies fear for their survival

PE: With demand continuing to fall and at best remaining stable, price reductions were seen for all polyethylene types covered by this report. In the vast majority of cases, they were between EUR 100/t and EUR 150/t. At the same time, European producers cut output substantially, but their intention to adjust supply to demand and thus perhaps prop up quotations was thwarted by higher imports. One small exception was HD types, where production was not reduced to such a large extent. Producers are nevertheless still just about managing to adjust output to the weak demand, but whether they will continue to be able to do so is highly questionable. According to PIE information, more and more producers are toying with the idea of releasing customers from agreed contracts because if suppliers have to fulfil them, they will be forced to keep plants in operation that are at present barely economical. Consequently, converters are orienting themselves increasingly toward the spot market. Should demand not improve significantly, the next step for producers would be to shut down their plants, but so far there have been few signs of this happening. Concurrently, more and more converters are reporting mounting recession concerns from the end markets, so they prefer to work from their stocks and, if at all, to buy on a small scale. Some are also implementing austerity programs, including short-time work. This will put further pressure on prices. Despite production cutbacks, markets are unlikely to be undersupplied because any difficulties experienced by European producers will be compensated for by imports. The only exceptions have been LLDPE hexene and octene film types.

PP: Little or nothing has basically changed since the previous month. Producers are still faced with very high fixed costs for production. Numerous converters are thus being offered the opportunity to withdraw from their contract agreements. For the producers, this has the advantage that they can shut down entire production sites as far as possible and run their remaining plants at full capacity. All in all, the mood is deteriorating noticeably. More and more converters are worried about their survival. On the one hand, they are having to keep goods in stock and write off inventories and, on the other hand, the material is weighing down the silos, with end users repeatedly postponing their call-offs. Planning for the long term under these circumstances is impossible. The C3 contract price again fell significantly in September, by EUR 165/t. If the production cutbacks fail to have any effect, it can be firmly assumed that almost the entire price drop for the monomer will be reflected in polymers quotations. The hoped-for revival in September is not yet anywhere to be seen in the order books. On the contrary, converters are even more hesitant to place orders than they have been of late.

PVC: The price drop for base material clearly exceeded the pro-rata reduction for the cost of ethylene. Less expensive base PVC coupled with weak demand resulted in lower prices in excess of the pro-rata decline in C2 costs for all reported grades. Further reductions are also regarded as certain for September. Contracts were well-fulfilled across the board. Fears of a recession increasingly spread among end consumers, however. During the holiday period, converters thus switched to buying only what was strictly necessary. Compounders were still able to adjust their output to the weak demand. Whether they will continue to be successful with this approach remains very much to be seen. Information received by PIE suggests that the production chain is increasingly considering releasing customers from contracts. While they are still obliged to fulfil these, they are also forced to operate plants that can scarcely be run at a profit at present. A case in point: Belgian resin maker Vynova has just announced that it is cutting European output due to low demand and rising production costs. Converters are thus moving more and more to the spot market. The next step to be taken by producers – if there is no significant improvement in demand – is to shut down plants. This could cut deep into the industry. The good business deals that producers have been able to achieve over the past two and a half years are thus a thing of the past.

Styrenics: After the EUR 509/t crash of the styrene reference, it was already clear in early August that prices for styrenics would follow. The discounts for PS, ABS, and EPS ranged from EUR 400/t to EUR 500/t. On the commodity side, there were only marginal impulses from the other ABS cost factors (butadiene up EUR 40/t, ACN down EUR 18/t). Producers tried to avoid passing the discounts on in full, preferring to use increased energy costs as an argument. But they were not always successful. Demand was so weak that there were several order postponements by processors. who were able to handle their – also low – incoming orders from inventory. Processors disagreed on the reason for the low demand: some attributed it to the typical summer lull, while others saw it as the harbinger of an impending recession. September is likely to be the decisive month for many processors: if demand from the end consumer markets remains weak, there is a threat of serious economic damage, not only, but also, for the furniture industry. September also promises to be a disruptive month for producers, especially with the styrene contract for the month fixed EUR 287/t lower. If they are overwhelmed by high production costs, plant shutdowns could become necessary, as was recently the case in Eastern Europe.

PET: The turbulence that has prevailed on the European PET market so far this year continued on into August. European producers started the month expecting rising revenues or at least stable earnings. Their hopes of passing on higher feedstock and energy costs to the market with the aid of production cutbacks, however, were rapidly dealt a blow by low-priced imports. The converters simply leant back and took material from their warehouses to meet the summer demand. Any peaks that arose could be covered at any time by the wide range of available alternatives. Against this backdrop, prices fell rapidly and sharply. In most cases, price reductions were well into the three-digit EUR/t range. After the major shock in August, European producers are having to make further cutbacks in their plant output, despite the considerable number of planned maintenance outages. In the face of skyrocketing energy costs and weak demand, they need to achieve at least stable earnings in September. On the demand side, however, converters are scarcely able to conclude emergency deals in a bid to retain their suppliers. Fears of a slump in demand are ever-present and the liquidity of many companies is no more than a mere trickle following the pandemic, the supply chain disaster, and the Ukraine war. Proceeding on sight would still seem to be the only viable strategy. Either way, the situation for autumn looks threatening.

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