PE suppliers win margin gains / PP and PVC calmer / Weak demand impacts PET / June will likely be a quiet month / SM plummets and pushes styrenics downwards
PE: After a stabilisation phase in the previous months, European PE producers at last managed to push through an increase in their margins in May – something that in their view was urgently needed. In the vast majority of cases, the hikes were more than the increase in the ethylene reference for May. The rises were due mostly to shorter supply, which occurred when the scheduled stoppages for cracker maintenance were made worse by unscheduled outages at other sites. Demand picked up slightly and provided a natural cap on the price increases. These hikes generally turned out to be moderate. The ethylene reference for June rolled over from the previous month. This is also likely to be the reference point for large sections of the PE portfolio, because a gradual improvement in production is expected. The maintenance season is coming to an end, but there is still little stimulus from demand.
PP: That European PP producers announced only moderate hikes in May shows how sceptical many were about achieving more than minor marginal improvements. Still, the price gains made in most polymer supply agreements were somewhat greater than the producers’ cost increases. This was thanks largely to the shorter supply, which reflected maintenance turnarounds. Demand in the month’s first half got somewhat of a lift from price rises along the crude oil chain, but ordering dropped off noticeably in the second half. Weakness in the automotive sector continued to depress demand for compounds. The propylene reference contract for June rolled over. There was no impetus to buy from any market segment. Against this backdrop, notations for polymers in the C3 chain are likely to move sideways this month. For compounds, developments will depend on whether calls for structural corrections are heeded.
PVC: Contrary to what had seemed likely at the start of May, PVC producers moved away from their high price expectations as the month drew to a close. Deals concluded in the last few days of the month generally included the pro-rata ethylene reference or just a small rise, while at the start of the month a EUR 20/t increase was achieved on frequent occasions. This is due to the continuing trend towards slight oversupply. Despite the maintenance shutdowns and the absence of imports, European production is more than adequate to satisfy demand, which is not exactly brimming over. The current picture is unlikely to change much in June. Producers will continue to try and increase their margins. Unless any major changes come about in the market, however, they are set to meet with strong resistance again, especially since the price level as a whole remains high.
Styrenics: After the SM reference contract increased by EUR 32.50/t in May, styrenics prices likewise rose slightly again. However, the hikes mostly reached the extent of cost increase at the beginning of the month. Thereafter, many processors only ordered essential volumes in anticipation of falling prices in June, so that suppliers were more willing to make concessions to sell their products. This lessened the hikes in the second half of May. Even a couple of rollovers were agreed, but isolated special deals with anticipated price reductions clearly remained exceptions. June will now see significant declines across the board after the SM reference fell by EUR 143/t. Price reductions for polystyrene and EPS are likely to be in the three-digit range. This might also be the case for ABS, where the smaller drop in costs for butadiene (EUR 60/t) and probably also ACN (not yet fixed at press time) will probably cushion the downward slide. The significant price discounts will initially provide processors with a good opportunity to buy. In many cases, however, further order activity in the second half of June is likely to depend on price expectations for the coming month.
PET: May was disappointing for European PET suppliers. The weather remained cool and rainy for long periods, keeping down demand. At the same time, prices in the Asian polyester chains fell sharply, which made imports more attractive. Despite this, suppliers saw their margins increasingly coming under pressure and have so far managed to keep price reductions within reasonable limits. It should be noted that this is how things stand – so far. Given the attractive imports coupled with persistent slack demand, there is talk of the need for production cutbacks. In addition, the PX reference for May was fixed very late at EUR 87.50/t lower, which would point to struggles on the cost side. European production is increasingly bordering on the uneconomical. Unless a summer heatwave suddenly breaks out like in 2018, clear reductions can doubtless be expected in June.