PIE - Polymer Price Reports

Standard Thermoplastics December 2015

Hikes for polyolefins and styrenics / Upward momentum slows during course of the month/ PVC and PET in weak rollovers / Notations expected to point mostly downward in January

PE: The major European buyers of polyethylene dragged the
price negotiations in December on until the very last week of the year. They
fought for every euro, also because bonus quantities meant that, in many cases,
the order volumes were higher than normal in this short working month. On the
other side of the fence, producers were determined to regain some of their lost
margin territory. The net result was that the increases were generally EUR
40-50/t, which, although less than the hikes seen at the beginning of the month,
were still above the nominal cost increase through the change in the ethylene
reference price for December.

The weakness in oil and naphtha notations led to the announcement, shortly
before Christmas, of a reduction in the C2 reference price for January. PE
buyers will presumably want to benefit from at least this cost reduction,
although it is likely that producers will initially offer a rollover. Should the
year begin rather subdued, as generally expected, due to the continuing weakness
of oil prices, at least moderate reductions will be difficult to prevent. One
element of uncertainty, however, is the tense situation in the Middle East,
where any escalation could influence both the global feedstock chains and
polymer exports.

PP: After being caught in a downward spiral in November,
notations turned around in December and pointed upward. Initially, prices added
a hefty EUR 50/t or more; however, the momentum later stalled noticeably, and at
the end of the month prices were EUR 10-40/t higher. In view of the stable
propylene contract, producers' margins improved. PP compounders' contracts
indexed to C3 moved sideways, in line with the monomer. At the month's outset,
demand was lively, but order activity slackened toward mid-December. Only film
producers ordered continuously. All those who could shuttered production well
ahead of the holidays as there was too little material in the market.

In January production cannot be expected to lengthen substantially. The C3
reference contract trended downwards quite significantly. How soon price rebates
will be offered, will depend in the main on the development of demand.

Potential trouble is brewing in the compounds market. The large integrated PP
players have called for "structural adjustments" in contracts indexed to C3,
which, of course, means they will be seeking higher prices. While buyers are not
likely to take it lying down, some of the hikes look likely to go through.

PVC: European PVC producers were engaged in a tough battle
over their margins in December 2015. Their efforts to pass on the proportionate
EUR 10/t rise in the ethylene price met with strong resistance. Although a few
of them managed to add the occasional euro, most notations rolled over. There
was little movement for PVC blends at the end of the year, despite the fact that
demand was quite lively for the season. Suppliers of paste grades, by contrast,
were able to pass on their higher costs without much ado. All considered, demand
was surprisingly strong for a December - a likely outcome of the extraordinarily
mild weather.

January's ethylene contract was fixed lower than that of the preceding month,
and base PVC producers would like to pocket at least part of the cost relief.
The fact that demand is expected to be quite lively could work in their favour.
On the whole, however, prices across the entire PVC portfolio are expected to
decline slightly.

Styrenics:The rise of the SM reference contract by EUR 35/t
in December 2015 also ended the recent month's downward trend of EPS and ABS,
after PS prices had already recovered in November. Premiums on PS often
surpassed cost increases because supply was even more difficult to secure than
for other materials. By contrast, ABS prices largely increased in parallel to
costs while many EPS prices lay below cost rises. In general, demand was
exceptionally strong for a December month until the industry prepared for its
hibernation of holidays and maintenance cycles shortly before Christmas.

After the SM reference contract declined by EUR 20/t in January, prices for
styrenics may point slightly downwards although producers will try to limit the
extent of the price reductions.

PET: There was relatively little movement on the European
PET price front in December 2015. With the cost situation stable, producers had
to give up the small margin gains they had achieved in November, and most
transactions were fixed at a weak rollover. Cheaper Asian imports were mostly to
blame for the latest fall, and also were at the root of the slight trend towards
oversupply. European production levels, by contrast, were normal for this time
of year, and demand also seasonally low.

Barring any substantial changes on the cost front, there will be little
impulses for change in January. So far, however, the feedstock front remains
murky. If this uncertainty leads processors to hold back on their orders and
should imports continue to find their way to Europe, notations will have nowhere
to go but down.

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