PE sees first hikes / Tight propylene feedstock drives up PP / Slight gains for PVC / PS costs passed down / Temporary firming on PET front / Olefin derivatives likely to point up in June
PE: Most European PE producers succeeded in halting the
downward price trend in May, even if the increases ended up being smaller than
they had hoped for. Following the minor EUR 5/t fall in the cost of April's
ethylene contract, they had been hoping to improve their highly unsatisfactory
margins by pushing through increases of up to EUR 30/t. The net result ranged
from a rollover - above all for the abundantly available HDPE grades - to small
gains for all film grades. By cutting back production, producers have been able
to adjust the supply situation to their advantage. EVA once again bucked the
trend, with prices rising steeply in response to the ongoing global VAM supply
PE's upward drive is likely to intensify in June. Ethylene prices have turned
around, and the monthly contract was fixed EUR 10/t higher. In addition,
producers are increasingly trying to control their output volume in an effort to
improve their margins as soon as possible. The upward drive could be curtailed
by imports of popular grades.
PP: The continued tightness of propylene feedstock pushed
western European standard PP notations higher again in May. As demand was within
its normal bounds, this meant that buyers had to be put on allocation. Most
producers of standard PP managed to secure at least twice the C3 increase and
thus improved their margins. Stagnating indexed contracts and stable additives
prices prevented PP compounds from rising.
The price of standard grades is likely to rise in June. Although propylene
supply is becoming more balanced, it will take some time for the situation to
return completely to normal. Producers will leverage the renewed rise in the C3
contract to push through additional price increases. This will push compounds
tied to indexed contracts higher as well. After earlier delays, the latest
upward momentum is also sure to affect freely negotiated transactions.
PVC: Despite the renewed slight decrease in the ethylene
contract (the proportionate decline came to EUR 5/t), European PVC base
producers were able to push through small increases in May. While some secured a
rollover, others were able to lift particularly low-lying prices by up to EUR
20/t. The same trend was evident among rigid PVC blends, largely as a result of
the fact that additive prices remained stable. By contrast, notations for
flexible PVC compounds and paste grades continued to move sideways.
June's ethylene contract made a turnaround, and following its rise, the
upward pressure on PVC is sure to increase as well. Producers' margins remain
under pressure from the ongoing weakness of the caustic soda chain. They will
try their best to exploit the improvement in seasonal demand to secure hikes.
Given that the markets are quite balanced, they are likely to succeed across all
segments of the PVC market.
PS: Most European styrenics producers had to make do with
passing on the EUR 20/t cost rise for SM in May, that is, if they managed any
hikes at all. Any hopes of achieving more proved unrealistic. In particular from
mid-month, as the downtrend in the aromatics chain began shaping up, buyers made
life difficult for their suppliers by holding back orders. Only EPS saw
increases in line with the higher production cost. For other products, initial
rejoicing gave way to wailing and gnashing of teeth, especially for ABS.
converters expected, the styrene reference price fell by EUR 45/t, reacting to
the significant fall in the benzene contract. Buyers will insist on
participating in this price relief, which also was seen for butadiene. Their
chances are especially good for PS and EPS. Producers for their part will try to
hold on to as much of the cost decline as possible. On the whole, June could be
a good trading month, especially as notations are expected to firm again.
PET: Throughout May 2014, European PET prices stopped their
downward slide. Thanks to stable PX costs, producers of smaller-volume lots were
even able to achieve slight hikes. They were aided by rising notations in Asia,
which eased import pressure somewhat, although foreign material is still
available. German recyclers in particular continue to suffer from high energy
costs. They were, however, able to keep prices stable even though virgin
material costs have been on a steady decline since the beginning of this
Prices are likely to move sideways in June. Looking further ahead, however,
producers will once again come under pressure as new western European facilities
are brought on stream. Import volumes are unlikely to cease either. All in all,
the pressure on the entire polyester chain, including recyclate, is highly
unlikely to decrease.