PIE - Polymer Price Reports

Standard thermoplastics May 2023

Downward trend for quotations continues / Most grades witness oversupply and simultaneously weak demand / Apparently seasonal upswing nothing but a mirage

PE: With the unexpected reduction of EUR 10/t in the C2 contract at the beginning of the month, the plunge experienced recently by polyethylene prices gained further momentum. The supply bottlenecks with specialities reported in April largely disappeared in May. In fact, the markets tended towards a surplus – or were already oversupplied. This was primarily due to the fact that the quantities ordered by converters were just under a third below expectations. Demand thus remained very weak again in the second quarter, despite it being the peak season. Even the stable hygiene sector saw reductions in demand. The slump in consumption and the uncertainty on the part of consumers depressed demand. Prolonged plant closures combined with short-time working and changes in shift work (for example from three shifts to two) have long been a reality in the industry. The fact that the C2 price for June was fixed down EUR 80/t is likely to accelerate this downward spiral. No improvement is in sight. Some converters could well bring their company holidays forward and send them off earlier than usual.

PP: In May, the EUR 15/t fall in the C3 reference and overall weak demand reduced polypropylene prices to their lowest level since February 2021. Quotations for compounds also weakened but were still higher than at the end of 2022. Demand suffered from the weakness of all customer industries ranging from the food to the consumer and automotive sectors. Added pressure came from less production time due to the many holidays and gap days in May and converters only covering their immediate needs while they anticipated additional price cuts. Buyers adhered to a famous stock market adage: never catch a falling knife. This could be a good metaphor for June as well with forecasts point to an even steeper fall following the EUR 80/t drop in the C3 reference. As demand in the run-up to the summer holidays can be expected to decline further, and producers are already sitting on rather full inventories, price cuts for polymer could exceed the rebates for the monomer. Triple-digit decreases appear probable.

PVC: The downward trend with PVC prices continued in May, and on a much greater scale than had been intimated by the small drop of EUR 10/t in the C2 reference. The European market was plentifully supplied, so producers were forced to cut their prices in some cases by triple-digit amounts. Not least, it was the continuing oversupply and the still-weak demand that led to this situation and to the build-up of producers’ stocks. Demand from the construction industry – the largest customer segment – was particularly low. There was no sign whatsoever of the usual high season. On the contrary, converters report genuine “price battles” for the few orders. Not much is likely to change with the market situation in June, particularly as the holiday season will start in Europe at the end of the month. Consequently, the C2 reference (down EUR 80/t) could serve as the initial orientation in price negotiations. Converters, however, are not expected to be content as usual with receiving half the price reduction, but are likely to insist on the full amount. Further triple-digit price reductions are also possible.

Styrenics: The styrenics market remained relatively unimpressed by the EUR 55/t increase of the styrene reference in May 2023. Producers managed to fully pass on the SM change only in very few cases, and these were mostly monomer-linked purchase commitments for polystyrene. Otherwise, however, lower premiums or rollovers were agreed for PS, and in anticipation of foreseeable discounts in June, there were also slight price reductions here and there, especially in distribution. As for EPS, some suppliers continued to roll over prices at the April level right at the beginning of the month, while others initially tried to drive prices upwards, with varying degrees of success. In the second half of May, when declining SM spot prices foreshadowed a sharp drop in the styrene reference in June, the general price level slid further down. The bottom line for this month: rollover and slight discounts predominated. Meanwhile, ABS prices oscillated around the previous month’s level. Some agreements, especially for extrusion materials, priced in the increased composite costs, while others paid tribute to low demand and amounted to slight discounts. June is expected to bring a more uniform price trend. This is because the styrene reference slid down a whopping EUR 127/t while demand is remaining lukewarm at best. Against this backdrop, triple-digit discounts are likely to be in store, at least in some cases.

PET: Hopes of a lively start to the season for the European PET market were washed away, quite literally, in May 2023. The water masses that flooded large parts of Europe well into the month prompted a further deterioration in consumer mood – which had already been severely dampened by inflation and other critical developments – also in the beverage sector. At the same time, the Covid flare-up in China and the ongoing weakness in North America caused feedstock prices to plummet worldwide. Towards the end of the month, the European PX reference was also concluded with a dramatic drop of EUR 105/t. In such a situation, where production had already been curtailed for a lengthy period of time, European producers had virtually no other choice but to reduce their prices in a bid to counter buyers’ hesitation and, at the same time, prevent a major switch to imports. The price reductions increased from week to week with a number of buyers even benefitting from triple-digit price drops towards the end of the month. While demand is expected to pick up again in June, this will be at a far more hesitant pace than before. Even if the weather takes a turn for the better, inflation will scarcely permit people to hold barbecues with the corresponding beverage consumption, and football is also taking its summer break this year. At the same time, further price drops are expected for PX and prices in Asia are nosediving. At least moderate reductions are thus likely once again.

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