PE under pressure despite slight rise in C2 / Increases for PP fall short of cost rise / PS follows SM´s downward trend / Notations expected to rise across the board in November
PE: At the onset of the last quarter of 2016, PE producers had no choice but to hold prices at September's level or even lower them slightly, even though the monthly ethylene contract had been fixed EUR 15/t higher. With converters´ order books not quite filled up, call-offs were relatively muted. As a result, availability was long, with a slight tendency to a surplus.
The latest rise in the C2 contract price will push PE prices up. Producers will likely be averse to lowering prices further, which would necessitate a substantial cut in margins.
PP: On the back of a EUR 35/t rise in the monthly C3 contract, notations for PP pointed upward again in October. While producers were able to pass on a bigger share of their higher cost burden, they were still unable to recoup all of the additional C3 cost and thus once again suffered margin losses.
With maintenance turnarounds having ended, output of European plants moved back closer to normal. The influx of imports also ebbed. With the fresh rise in the C3 contract for November, prices along the propylene chain will continue to spiral upward. Whether the full EUR 30/t can be passed on to buyers or producers may be able to add an additional margin component will depend largely on the extent to which demand in the last "normal month of 2016 is influenced by the harbingers of the approaching year-end holidays.
PVC: Aware that they would be unable to achieve any margin gains, European PVC producers nevertheless tried to pass on the slight increase in base material costs in October. That proved difficult enough and it was only thanks to their stubborn resilience that most were in the end able to pass on the proportionate EUR 7.5/t increase in the ethylene cost. The approaching winter season was already casting a long shadow over October transactions, as processors began to schedule their orders in weekly intervals.
In the case of ready-to-use blends, the higher cost of most additives - including titanium dioxide, modifiers and plasticisers - exerted additional pressure, driving notations up beyond the increase in matrix material costs. The decline in imports enabled PVC paste producers to achieve slight margin gains.
Headed into November, costs continue to point up. Given that demand will enter its usual winter off-season, PVC base material producers thus remain under pressure. Exports could offer some reprieve, although it remains to be seen how this market develops. Amid the ongoing increase in additive costs, both dry blends and compounds notations are expected to see disproportional rises in November again.
Styrenics: The decline in October's styrene reference contract took PS and EPS prices down with it. Most producers found themselves having to pass on the entire EUR 50/t cost decline - only in the case of EPS insulation materials were they sometimes able to pocket a small margin component. There was almost no movement on the ABS price front as the higher cost of both butadiene and ACN in effect cancelled out the SM decline. As a result, notations mostly rolled over or were adjusted slightly downward.
The market situation is expected to change again in November. In the wake of the accident at BASF in Ludwigshafen / Germany and the resulting temporary shutdown of the site's SM production, spot prices rose noticeably. Spurred by this, November's SM contract was fixed EUR 40/t higher, and styrenics prices will likely follow suit.
PET: Although European PET suppliers were able to lift the prices of small-volume lots slightly in October, their margin situation remained precarious. Imports from India, Southeast Asia and increasingly also Turkey continue to arrive on Europe's shores, undermining producers' efforts to improve their bottom line. Utilisation rates in Europe currently stand between 70-80%. Orders for mid-sized and bulk lots were generally caught in a rollover. Demand, meanwhile, was rather lacklustre.
Headed into November, there is little for PET producers to look forward to. Demand for cold beverages - which proved rather weak this year as a result of the poor summer weather - is ebbing, with most consumers switching to hot drinks instead. PET is not much in demand for the latter. Availability is expected to remain good. Provided there is no change on the cost front, producers might have to give up the small gains again.