Weak demand meets curbed production / Little hope of recovery after end of holiday season / Prices expected to move sideways in September

PE: The rise of EUR 20/t in the C2 contract, in combination with a poor margin situation and relatively solid demand, enabled producers to hike prices for film grades quite considerably. At the same time, they frequently carried on with their production cutbacks. Although there were no early order stops as a result, many deliveries were delayed. On the demand side, some converters had enough to do despite the holiday season. Especially in the DACH region (Germany, Austria, and Switzerland), this kept demand at a relatively high-but-robust level. One exception was EVA – producers lacked the arguments to reverse the downward movement that has prevailed since May, although in many negotiations, an agreement was reached to carry over the previous month’s prices. September usually sees a pick-up in demand, and producers might be tempted to try and obtain further margin improvements. Converters, however, are expected to do everything they can to prevent this because they, too, have to battle with erosion in their margin situation. The reduction of EUR 25/t in the cost of C2 is likely to exert pressure on prices. For another month, the cuts in the supply situation will ensure that contracts can just about be met. An improvement as regards the import situation is not expected before the end of the month at the earliest. A slight rise in demand after the holiday season can be attributed to the building up of stocks by some converters. 

PP: August was not very spectacular – many processors shut down operations, impacting demand that was already low. Against this backdrop, PP producers were unable to raise prices above the increased C3 costs (up by EUR 20/t). And in the case of compounds, they didn’t even manage that – suppliers often had to make do with only factoring in part of the costs. At best, only minor price changes are to be expected for September, as opposing trends are influencing market developments. On the one hand, the reference contract for polypropylene fell by EUR 30/t. On the other hand, suppliers will want to take advantage of the fact that demand is picking up again after the holidays, while supply has been thinned out by plant breakdowns and reduced imports – at least for PP copolymer.

PVC: Prices for PVC went up again in August. After the ethylene contract rose by EUR 20/t, producers attempted to push through considerably higher hikes at the start of the month. As the month progressed, however, negotiations were increasingly based on pricing in half the C2 contract. The anti-dumping duties that had been introduced had an effect and only a few imports arrived from the US. Despite production running at a reduced level in Europe, contracts were met in full. Maintenance work and a force majeure had no notable impact. Producers increasingly focused on the Indian market, which they used as an outlet for surplus volumes. In September, they are insisting on what they consider to be an urgently needed improvement in their margins – after quarterly figures recently led to long faces. Producers are expected to attempt to raise prices further. In view of the C2 price being fixed at -EUR 25/t, however, this is likely to be difficult.

Styrenics: The market for the feedstock, styrene, posed a dilemma for some styrenics producers in August. Producers without backwards integration who were trying to buy feedstocks at the beginning of the month were confronted with SM spot prices that had skyrocketed far above the uptrending styrene reference contract (up EUR 78/t). As a result, they initially demanded premiums that in some cases far exceeded the change in the contract price – EPS, for example, was offered with premiums of up to EUR 300/t. Even backwards integrated producers tried to hop on the bandwagon to improve their margins. This was most successful for EPS, where suppliers were ultimately able to increase prices for insulation materials by EUR 100-120/t. Producers succeeded less in selling polystyrene for more. When spot prices started to fall again in the middle of the month, premiums for polystyrene increasingly approached the contract price change. This also applied to ABS, albeit to a lesser extent – at the end of the month, the level of premiums was more in line with the increase in composite costs (up almost EUR 60/t). The fact that demands were scaled back was not least due to the extremely low demand. Not only did the holiday season come on top of an already weak economy, many processors also felt that the August premiums were not sustainable. They therefore only bought the essential volumes they needed on the spot, but not an ounce more. Despite this, prices are unlikely to decline in any significant way in September due to the continuing difficult supply situation for styrene and, again, unpredictable spot markets. What’s more, the SM reference for the final month of Q3 eroded by only EUR 8/t and the other composite costs for ABS hardly changed (butadiene rollover, ACN down EUR 7/t). Producers for styrenics are likely to push for a strong rollover and processors for slight discounts – all in all, there should be slight price movements at best.

PET: The European PET market was quiet during the month of August. Converters’ semi-finished product warehouses remained well stocked following the disappointing level of demand in July and the still sluggish purchases by end markets. This meant that the holiday period did not cause major production problems. At the same time, falling logistics costs and the strong euro made for increasingly attractive import offers, especially from Vietnam and Turkey. Even the FM announcement at a Spanish PET production plant had very little effect on market activity. Overall, European suppliers had to make at least moderate price cuts in order to maintain sales. The PX reference contract for August was only fixed late in the month at EUR 925/t, down EUR 65/t from July. Since there are no signs of a substantial change in the market situation, significant reductions can be expected in September in response to this fall.

More information on PIE Polymer Price services ...