Muted demand prevents producers from passing on costs / Little momentum expected for December / SM drives styrenics up / Other polymers likely to see declines
PE: There was nothing that could be done to help European PE
producers in November. They were occasionally successful at the beginning of the
month in pushing through minor rises, but were unable to pass on the full
increase in the ethylene reference. As the month progressed, buyers seemed to
lose any inclination to do business and, at the same time, notations along the
oil chain declined. At the end, producers were happy if they were able to win a
LLDPE continued to suffer from an influx of imports and prices
fell across the board. The glut predicted in recent years really does look as if
it is going to happen. The pipe sector has been suffering from poor sales for
several months, and this is likely to become even worse in December.
The ethylene reference price was fixed later than usual. The OPEC conference
in Vienna at the end of November aroused strong emotions when a deal was hinted
to limit oil production. The price cuts that had seemed almost inevitable were
modified, at the end of the day there was a decrease.
After all, the situation on the polymer market clearly points to a fall in
prices in December. The cost development will certainly have a softening effect
on the dynamics but not on the basic direction.
PP: In relatively quiet November trading, PP producers had
to bite the bullet and accept a further deterioration of margins. In only a few
cases were they able to pass on the higher cost of C3. Prices for most polymer
grades lost momentum and ended the month in a rollover. The steady decline in
spot prices for propylene during November did its part to solidify the
Price movements for compounds lagged behind the slight rise in the price of
standard PP. In an interesting development, the new system of indexing compounds
to standard PP worked to the buyer's advantage this month.
December will surely see prices decline across the entire C3 chain. Despite
OPEC's curbing oil output, the propylene reference contract will react to the
downward movement on the spot market and lose ground. In the short working
month, PP will also follow the trend.
PVC: European PVC producers were unable to achieve their aim
of obtaining a small margin improvement in November. Despite some problems on
the production side, the heavy fall in demand in the off-season provided a
natural limit to producers´ calls for a hike. By the end of the month, the price
increases were smaller than the proportionate rise in the cost of ethylene. This
was also the case with PVC paste. With the blends, on the other hand, increases
in the cost of modifiers and plasticisers meant that blend prices rose slightly
more than the matrix material.
In December, the ethylene reference will probably fall, and there is no doubt
that customers will want to be part of it. In view of the expected sluggish
business in the final month of the year, their prospects are quite good.
Styrenics: In November 2016, styrenics prices have ended the
general downward trend of the previous months. The SM reference contract's
increase by EUR 40/t caused prices to trend up again, even if not always to the
full extent of the cost increase. Especially PS prices were marked by the good
availability of distribution volumes.
There was a respectable level of demand. Purchasers soon lost their initial
reluctance to buy since SM spot prices rose steadily throughout the month,
pointing at significant price increases in the next few weeks.
It now looks as if they were right: The SM reference contract for December
has made a giant leap of EUR 170/t. This major cost increase should propel
styrenics prices up by quite a bit. At least for PS and EPS, three-digit
premiums are not out of the question. On the flip side, this will likely
strangle demand at the end of the year, in a month that already is shortened by
Christmas holidays and in which many processors keep their stocks low for
balancing reasons. Considering this, it remains to see whether the entire cost
increase can be transferred to polymer prices.
PET: The increasing strength of the dollar following the US
presidential elections provided European PET producers with a little more
breathing space in November. The stranglehold of cheap imports declined because,
on the one hand, prices on the Asian markets picked up and, on the other, the
falling value of the euro made exports to Europe less attractive. Because of
this, European producers were at least able to recoup the minor cost increases
for PX and MEG despite the continuing sluggish demand. Occasionally, they even
managed to win a margin increase, albeit very small.
Stabilisation was also in evidence on the secondary market in November after
the falling primary notations had put pressure on the recycling business in the
Against the backdrop of a very well-balanced market situation, most market
players expect December to present a calm and stable picture in both the primary
and secondary segments.