PE and PVC mostly rollover / Transfer of costs with PP / Styrenics and PET lightly ascending / Upward pressure in February in parts significant
PE: European PE producers began 2018 with ambitious calls for increases on a broad front. They were aiming to recover a considerable amount of the margins lost in previous months. The rollover of the ethylene reference put an initial damper on these intentions, but then came the strengthening of the euro, which provided an incentive for imports into the euro zone. Apart from that, many converters had stocked up sufficiently in the previous months to allow them to sit through any attempts by producers to hike prices. Below the line, notations mostly rolled over, and there were even reports of reductions for LLD grades. The ethylene reference for February has risen by EUR 20/t. Producers are now repeating their demands from January, which increased accordingly. As things stand, it looks as if they will only win more than the reference increase in some seasonal market segments such as the higher-grade LLD types and pipe material. In the other segments, the most likely scenario is that sellers will succeed only in factoring in the rise in the ethylene reference price.
PP: In January 2018, a barely balanced market situation allowed European PP suppliers to effortlessly pass on the cost increase of the propylene reference across all grades of polymers. In the course of the month, the trend towards bottlenecks grew stronger. At the same time, US news on sharply rising propylene prices provided ground for worries. Meanwhile, demand from end markets again proved to be robust, especially in the compounds segments. There still was little reason to buy, as some processors had already stocked up in the previous months. However, this could change in February. The European propylene reference trended up again, even though there were some first signs of relaxation from North America. The markets were shocked to hear that Total declared force majeure on its PP production in Feluy / Belgium, and Gonfreville / France. Against this backdrop, new demands by PP suppliers spread like wildfire. Premiums that significantly exceed the reference contract are becoming likely. Demand seems to be continuing unabated and spring production will have to be secured early, as there could even be a run on volumes.
PVC: In January 2018, Europe's PVC producers had set high goals for themselves - too high as it turned out. Suppliers had expected good export opportunities, but these came to nothing on account of the falling exchange rate of the US dollar. Marauding spot quantities thus undermined the regular market. Only in regional or structural niches were slight increases pushed through. PVC base grades, however, were generally subject to a rollover. The same holds true for soft compounds and paste grades. Rigid PVC compounds, by contrast, were driven up again by the continuing upward movement in titanium dioxide. The ethylene reference contract for February 2018 increased by EUR 20/t. Backed by this slight rise in costs, the producers are launching a renewed attempt to regain lost margin territory. The expected market situation will dampen these hopes somewhat. The pro-rata cost increase, however, will most likely be reflected in all the different grades in the report. Rigid materials are still subject to the pressure of rising prices for additives.
Styrenics: At the beginning of the year, prices for PS and EPS increased only marginally, mimicking the styrene reference. The premiums on ABS turned out to be stronger because the movements of butadiene and ACN led to increased composite costs. As in previous months, European ABS producers benefited from Asian imports that were not significantly cheaper than European material. Other styrenics also reached a respectable level of demand for the season. The availability of white EPS material is still limited, even if the current situation is not as dramatic as it was in autumn. On the other hand, the significant increase of the SM reference contract in February by EUR 130/t will be followed by stronger price movements in the next few weeks. At least for PS and EPS, three-digit price hikes should be anticipated. Premiums on ABS will be limited by the weak increases of butadiene by EUR 50/t and probably of ACN (the price was not yet available at press time). The EPS situation could remain tense and prices are likely to approach the record highs of the past year. Market players already fear a trend similar to what happened in 2017, when the high price level for SM and EPS discouraged some players from building up enough stock in the winter - a decision that hit them hard when the construction season started.
PET: PET notations for January 2018 increasingly experienced upward pressure in Europe. No more than a strong rollover resulted, however, with low-priced deliveries, in particular, being brought into line. This was against a backdrop of rising polyester prices in Asia. Growing demand for virgin material in China, due to import restrictions on post-consumer waste, is frequently cited as a reason. The outcome is a noticeable decline in offers for favourably-priced imports in Europe too. At the same time, demand became more lively and gave rise to a perceived tightness in places. January did not see sufficient stimuli to push through increases across the board. This is set to change in February, since preparations are being made for maintenance in March, while imports are still running at a low level. Availability will then be curtailed further. Since costs are tending upward, additional purchaser groups will presumably be on the hunt for volumes, given that they need to prepare for the spring.