PIE - Polymer Price Reports

Standard thermoplastics December 2022

Start price for 2023 the focus of discussions / Processors mostly able to negotiate in their favour / Demand to pick up initially

PE: During negotiations in December, the prices for the final month of the year only played a very minor role because hardly any material was purchased anyway. Producers and converters quickly reached an agreement on reductions, sometimes slightly below and sometimes slightly above the fall of EUR 25/t in the cost of the C2 monomer. 
Instead, the focus during the sometimes-tough negotiations was on fixing the starting price for the contract agreements in 2023. Neither side wanted to give ground, which meant that the discussions were correspondingly fierce. In the end, the entry prices for 2023 for LDPE and HDPE were reduced significantly and, with the C6 and C8 grades for LLDPE somewhat less in view of the more balanced supply situation. In any case, many converters are intending in 2023 to reduce the volumes secured by contract agreements and instead take advantage of favourably priced spot market material.

In January, most PE prices are likely to drop further. The reasons for this are the reduction in the starting price, the latest fall of EUR 95/t in the C2 reference, the continuing influx of low-priced imports, and the still-weak demand, which is picking up only hesitantly despite some stock-building activities. The C6 and C8 grades of LLDPE are the most likely to escape this price pressure because demand is apparently gradually stabilising and there is less competition from cheap imports.

PP: What a year 2022 was! In April, the war in Ukraine pushed prices for polypropylene to heights never seen before and never anticipated - well above EUR 2,400/t, an increase of 100%. And then came the turnaround. Since then, prices have been pointing in only one direction - downward, though as in real life, everything, including polymer prices, is relative. A look at the history of PIE´s continuous coverage shows that pricing is at a high level compared with the period before the pandemic.

How polypropylene will develop going forward is anyone´s guess. Certainly, plastics buyers in the plastics industry have no crystal ball. The numbers show that the C3 reference sank by EUR 30/t in December, but the decline was not entirely reflected in the price of base polymer.

Due to force majeure declarations and production cuts, European output was limited. Contract commitments could be filled, however. Cheap imports, especially from Asia, widened supply. The holiday-studded short working month reflected the forecasts. As they continued to draw down inventories toward year´s end, converters covered only their immediate needs.

In negotiations for the first contract of 2023, skirmishes were hard-fought. This was because in many cases, imports from the Middle East, Asia, and the US were far cheaper than European products. This played directly into converters´ hands, as they could threaten to order less from their usual suppliers and instead buy on the spot market.

PVC: PVC prices continued their downward trend in December 2022. In the case of base material, weak demand and inexpensive imports put prices under pressure. The resulting downward movement also prompted further price reductions for compounds, although these were cushioned by lower cost reductions for additives, as was seen with S-PVC (U) and S-PVC (P).

Since prices for PVC base material reached their peak in April, quotations for the material have fallen 18%. December´s price is also down 7% from the previous year. If we take the comparable figure for December 2020, however, when PVC was just at the outset of its almost two-year run of high prices, quotations are 56% higher.

However, much more than current costs for December, the starting price for 2023 has featured prominently during the sometimes acrimonious end-of-year discussions. Converters frequently achieved a significant reduction in the starting price by pointing out to producers that they would be covering their volume requirements to a greater extent via the spot markets in future. This argument, continued weak demand, and the EUR 95/t decline in the C2 reference, are likely to result in even more pronounced price reductions in January.

Styrenics: The bottom has probably been reached – at least for the time being. In December, styrenics prices dropped severely again after the styrene reference for the last month of the year plummeted (down EUR 132/t). Several polymer producers kept their discounts below the monomer cost reduction, pointing towards increased energy costs. Particularly for EPS and ABS, however, some suppliers passed on the full SM cost decline as a reaction to weak demand, which was further dampened because processors were reducing their stocks.

Considering the year as a whole, the landscape of polymer prices looked rather mixed. In April, ABS prices had marked an all-time high, just as polystyrene and EPS later in July. Then came the crash. The downturn led to ABS injection moulding being 15.6% cheaper in December than the same month in the previous year, HIPS injection moulding being 8.5% cheaper and EPS insulation white 14.3% cheaper. However, these decreases are put into perspective when looking back a little further: against the comparable values of two years ago, ABS injection moulding was still 27.6% more costly, HIPS injection moulding 30.3% more costly and EPS insulation white 50.5% more costly.

At the start of 2023, prices are likely to move upwards again, at least for PS and EPS, after the styrene reference for January went up by EUR 115/t. In ABS, meanwhile, the discounts for butadiene (EUR -100/t) and the expected decline for ACN are slowing down the upward momentum.

In addition, demand is picking up again. This is because many processors who, for balance-sheet purposes, made sure to keep inventories as low as possible at the turn of the year, will have to replenish their stocks. It remains to be seen how sustainable the resulting recovery in demand will be. At least in the construction sector, demand remains subdued, and ABS is under continued price pressure from low-cost imports. However, even if the demand for plastics should subside again after the inventory replenishment effects, prices will receive some support from further supply limitations when maintenance-related plant shutdowns are added on top of the existing production curtailments shortly before spring.

PET: Following the hefty turbulence of the previous months, the European PET market oscillated rather more gently towards the end of the year in December 2022. While demand remained at a miserable level, massive curtailments by producers gradually started to take effect. Inventories seem to have passed their peak already. Production in Asia was also reduced to a noticeable extent due to the weak demand worldwide, causing the most aggressive import offers to disappear. European producers seized this sliver of hope and adopted a tougher approach to the annual negotiations for major contracts. At the same time, they were able to limit price reductions to a comparatively low figure of around EUR 20/t.

The situation seems to have bottomed out in December 2022 and the signs for January are that things will calm down. Initial indications of a slight recovery are emerging from the end markets, and the supply situation would appear to be heading towards normal again. Import offers are at an appreciably higher level than of late. This would suggest that the downward trend will come to a halt.

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