Further price reduction on weak demand and overall good supply / End of energy surcharges in sight / Prices under pressure with fewer working days in April due to Easter break
PE: Only seldom were producers able to fully factor in the March increase of EUR 30/t in the cost of C2; in fact, they were only successful with the somewhat less readily available LLD materials. With all the other types covered by this report, they suffered margin losses despite gaining small increases. Both scheduled and unscheduled reductions in output continued to limit European supply. Nevertheless, because demand was also still weak, there was enough material around to fulfil the orders, even though imports were a bit rare. Only with some speciality types were there delivery delays. The hoped-for return to seasonally normal demand failed to materialise. Although the packaging industry and the building segment increased their ordering slightly, it remained below expectations, especially in the DACH region and in the Benelux states. The Polish market was also affected to a certain extent by this weakness. On the other hand, there were reports from larger markets further south, such as France, Italy, and Spain, that ordering activity was approaching its normal level. For April, some producers have announced the reduction or even the cancellation of energy surcharges. This, plus the EUR 40/t fall in the C2 reference, is likely to put prices under pressure everywhere. Only with the LLD-C4 materials and, to a lesser extent, also the C6 and C8 sister products, could there be a rollover. At least, however, the reductions are expected to be smaller. The reason is the declining availability due to the lack of imports. The prices of all other types covered by this report should, on the other hand, fall more significantly because the Easter break is expected to put an extra damper on demand.
PP: March began on an unspectacular note, with supply and demand balanced. European plants were still operating on a low flame, but output was sufficient to meet all contractual obligations. In contrast to expectations, import material, in particular from the Middle East, was not in plentiful. In mid-March, the naphtha contract was fixed nearly 10% lower, leading distributors to clear inventories and offer special deals in anticipation of price pressure in April. These moves did not meet with much resonance, however, as demand did not liven up over the course of the month. As expected, the C3 reference price for April came down by EUR 40/t. On top of this, producers have announced plans to reduce energy price surcharges or drop them altogether. In anticipation of either or both, selling prices will likely come under substantial pressure. Adding fuel to the fire, should the large PP plant in Poland actually start up this month, as long rumoured, and begin producing material on spec, supply would swell. And then, imports from the Middle and Far East have also been announced.
PVC: The brief flicker of life in February faded again in March, with the result that PVC and compound prices reversed course again and were fixed slightly lower. Converters were able to successfully fend off attempts by producers to factor in the proportionate costs – the C2 reference rose by EUR 30/t. Despite the ongoing production cutbacks in Europe, there was still sufficient material on the market to easily fulfill the contracts. Unlike in previous years, seasonal demand was not very strong in March. Although there were again more orders from the construction industry, purchased volumes were still well below the usual level. Even the first long production month this year was unable to change anything. With the ethylene contract down EUR 40/t, prices will be under pressure in April, and demand is not expected to revive much either. Converters are at present still lacking orders, and there will be fewer production days this month because of the Easter break. Only the building renovation sector offers a glimmer of hope. Nevertheless, prices are likely to fall further.
Styrenics: The styrene reference plummeted by EUR 113/t in March 2023 and styrenics followed suit, among other things because producers did not really have anything to counter the decline considering weak demand and abundant supply. Some producers tried to keep the decreases below the styrene cost reduction because of what they considered to be too meagre margins. They came closest to achieving higher margins with polystyrene, while EPS in some cases recorded discounts even beyond the SM decline. Even with ABS, the cuts were not always lower than the reduction in composite costs. Despite all this, it looks as if prices might have bottomed out for now: the styrene reference moved up again in April, albeit only slightly, and styrenics prices are also likely to follow the monomer reference in the Q2 opening month. This is doubly true since producers still see a need to catch up in terms of margins.
PET: The European PET market was very volatile in March. At the beginning of the month, buyers were sometimes able to snap up material with a discount of up to EUR 50/t. Initially, many customers held back in accordance with the maxim “never catch a falling knife”. But the situation changed after the first third of the month, when import prices moved considerably higher due to heavy increases in China and the rest of Asia. At the latest with the announcement of the European PX contract reference for March, which fell only marginally, European suppliers then tightened the screws. Especially the larger volumes at the lower end of the range saw small upticks, while the more readily available material at the upper end mostly changed hands at a rollover. Following a rather disappointing start to the season, demand looks set to pick up again in April. In PIE panel conversations, lively ordering activity was reported. Because imports are expected to remain expensive and, at the same time, the feedstock situation appears to be stable, European producers should be able to achieve at least moderate increases.