In the month of summer slump, producers flood the market with special offers / Polymers plunge even more than monomers / User markets remain lukewarm
PE: Who would have thought it? July was the month of the summertime blues, but at the same time it proved to be a month of special offers – in many respects. Although the cost of the monomer fell EUR 100/t, the price of most types of polyethylene dropped even more. In fact, the price range was enormous. The continuing weak demand plus a lively supply of imports put even more pressure on prices. Despite maintenance turnarounds and production cutbacks, producers were able to generally fulfil their contracts. A number of “special offers” were also around with much bigger price reductions. On top of that, reports surfaced of “off-spec” material being offered. Nevertheless, ordering activity remains slow because the user markets can simply not get into gear, which means converters can often produce orders from their existing stocks. There are still no major follow-up orders to be seen.
PP: Just when it seems that things can’t get any worse, they do. Again in July, polymer prices sank even more sharply than the fall in monomer prices would lead the market to expect. Put simply, Europe was oversupplied, thanks in part to a glut of imports from the Middle East and Asia. Making the situation even more fragile, summer holidays are pushing demand sharply downward. Producers who wanted to make a sale last month, pushed “special offers” into the market. The polymer price decline last month even topped the monomer’s already-pronounced EUR 120/t backslide. At present, there is no hope for producers in sight. August is also likely to see further output cuts, as demand shows no signs of reviving.
PVC: PVC prices in July continued the downward trend of the previous two months. Prices remained strong, however after repeated records set during the two-year high-price period that ended in April. Renewed reductions in July were triggered by the EUR 100/t decline in the C2 contract. Additional pressure resulted from weak demand due to the holiday period, slowing momentum in the construction sector, and readily availability material from abundant imports. Price reductions on the market here thus frequently went considerably beyond the pro-rata drop in the cost of C2. And even greater price reductions were granted by a number of producers who wanted to boost sales through special discounts for customers who provided purchase guarantees. The basic tendency is for few changes in August. The C2 contract weakened again with a fall of EUR 70/t, imports are still flowing in, and the peak holiday season has arrived in key markets like France and Italy, which is similarly dampening demand. PVC prices are set to continue their downward movement.
Styrenics: Prices for styrenics peaked in July 2022. The increase in the styrene reference at the start of Q3 pushed prices for polystyrene and EPS to new all-time highs despite weakening demand. The exceedingly high price level, growing fears of recession and speculation about an upcoming price correction made processors buy only indispensable volumes and reduce inventories instead, where possible. Demand for ABS was so weak that suppliers were unable to price in the increased composite costs in the second half of the month. In anticipation of the foreseeable price reversal, many of them – especially in distribution – conceded the first discounts already in July to boost sales. As a result, there was a real potpourri of prices, with both price increases and decreases. Overall, however, ABS prices barely missed their previous all-time highs. All of this is likely to change in August – as it will for all styrenics, because the styrene reference has slumped by a whopping EUR 509/t. For PS and EPS, suppliers will try to retain part of this huge cost reduction, especially since they are still sitting on older, more expensively produced stocks. As for ABS, the price slide is cushioned by the smaller cost changes of butadiene (up EUR 40/t) and ACN (down EUR 18/t), but even here, the bottom line is a decline in composite costs of around EUR 300/t, disregarding energy costs. On the demand side, any significant pick-up would be rather unexpected. This is because recession fears will not subside in the short term, and the holiday season with the usual company vacations and production cutbacks is further dampening demand.
PET: The turbulence in the European PET market continued in July 2022. The key feedstock PX was in very short supply, and its price rose drastically, fuelled further by euro weakness. European producers no longer curtailed production voluntarily but were forced to do so by a shortage of raw materials. This was coupled with demands for PET firmly in the three-digit range. When the PX contract was finally fixed with a hike of EUR 305/t after a delay of several weeks, producers were generally happy to accept EUR 100/t in light of import volumes that were still available and the rather hesitant demand for the main season. Below that price, however, nothing was left to be had. Given the uncertain situation, there seems to be no alternative to further price increases from the producers’ point of view. But it is not just the raw material and producer markets that are in turmoil – the end markets are equally fragile against the backdrop of a feared recession. Converters will thus continue to act with great caution. Import warehouses are emptying out, however, and soon there will be no new imports in sight. Further hikes are thus likely.