PIE - Polymer Price Reports

Standard Thermoplastics May 2018

PE, PP and PVC stuck with cost hikes / Declines with PS and EPS / PET preparing for steep rise / Costs shoot up significantly / Clear increases inevitable

PE: With the C2 reference price for May rising by EUR 20/t, European PE producers felt the time had come to restore margins. However, it became clear that the announced price hikes were too ambitious. The bank holidays in May gave buyers sufficient reason to hold back on purchasing. Overall, the PE market was weak, apart from the pipe sector. Prices for LDPE ended up slightly below the increase in the reference price, and only the pipe grades managed to match it. During the month, the term "production cutbacks" began making the rounds, partly initiated by maintenance work at feedstock plants. Prices in the oil and petrochemical chains also began rising, stimulating business in the second half of the month. The C2 reference for June has risen by EUR 63/t. This will be the lower yardstick for producers, because the decline in the high margins achieved back in spring 2015 has again taken prices close to the limits for European production. Because June is a full working month, demand should be livelier. Prices are expected to move up on a broad front and producers could well win increases above the reference rate.

PP: After the May C3 reference contract was fixed EUR 25/t higher, European PP producers wasted little time in sending out price increase announcements. With the many bank holidays in May, converters still had sufficient inventories and did not need to buy. Some increases did go through, but most landed far short of the monomer's rise. For the indexed compounds, the C3 increase automatically triggered an upward adjustment. Here demand was noticeably firmer than for the commodities. The June C3 contact was fixed EUR 80/t higher, reflecting higher crude and naphtha prices. At minimum, PP producers will try to pass through the cost rise in full and add a margin component. As converters will have some catching up to do in June, demand should rise. For compounds, the indexed prices should rise in tandem, as usual.

PVC: With the market tending to oversupply, producers lost a slice of their margins in May. Rollovers predominated for base product and compounds, with pro-rata cost hikes of EUR 5/t reported. The upward momentum in plasticisers and titanium dioxide had slowed in the prior month and prices remain stable at a high level. Compounds and the pipe segment were particularly affected by the lull in demand due to the holidays. Sales volumes of E-PVC pastes remained robust, however, even in the previously weakening wallpaper segment. The massive EUR 63/t increase in the C2 reference contract went further than many had feared. Having had to accept margin cuts in May, producers will attempt to avoid this in June. They could then try and push through hikes in excess of EUR 30/t. With demand set to pick up further and maintenance work scheduled at a number of plants, this should curtail the oversupply. Negotiations could prove to be tough.

Styrenics: Further reductions were recorded here in May 2018. Polystyrene and EPS notations largely followed the decline of the styrene reference contract. Price reductions for ABS were smaller, as butadiene and ACN surcharges counterbalanced the downtrend. Holidays dampened demand. Additionally, many processors speculated on further price reductions in June at the start of the month, and only bought necessary volumes. In the second half of the month, these expectations failed in view of increasing SM spot prices. In the slipstream of the June SM reference contract (fixed at EUR 60/t higher), prices for styrenics will certainly also increase. ABS prices have additional upward potential because of the continuing uptrend of butadiene, which rose by EUR 140/t.

PET: The situation on the PET market became even more complicated in May 2018. The low influx of material from Asia, where prices exploded by 20% over just a few weeks, pushed spot prices up sharply in Europe too. This was accompanied during the month by reductions in European production due to the outage at the key PTA plants in Geel / Belgium. At the same time, the season got going on account of the good weather. Trading prices are now well above the contract prices - a phenomenon typical of tight market conditions, but one not seen with PET for a long time and currently causing concern. The long-term contracts of a number of big consumers scarcely increased, while the contracts for small to medium volumes were concluded at a higher level than for the month before. Since March, there have already been three-digit notations here. The signs for June are pointing to a storm. While the market is remaining tight, oil and petrochemical prices are rising. If the good weather continues and PTA supplies are not restored, PET prices could become unaffordable, since no real help is in sight from Asia. Three-digit increases across the entire market are not unlikely.

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