Polyolefins and PVC oriented towards cost reductions / Styrenics subproportional to SM / PET continues to slide / Substantial turnaround not in sight
PE: European PE markets in September were characterised by the effect of the declining C2 reference. Producers wanted to hang on to some of the cost reduction, but they only succeeded to a minor extent with niche applications. Materials subjected to only low competition such as the high-quality LLD (C8) grades proved to be the strongest in this respect. C4 grades exposed to imports, on the other hand, in some cases even fell by slightly more than the cost reduction. Demand was cranked up as buyers looked ahead to the annual bonuses and in view of prices bottoming out after the attack in Saudi Arabia. Demand could be described as more or less normal. However, because this is not based on real demand from the end markets, this trend could come to an end in October. Converters` stocks have been topped up and no speeding up of sales is in sight. Producers will find it difficult to push through in full the renewed slight increase in the C2 reference. They are only likely to succeed where the supply situation is sufficiently trimmed.
PP: The European C3 reference for September declined noticeably. Despite the continued weak demand, PP producers were able to retain a moderate part of the reference price change as slight margin gains due to the supply shortage. With notations of PP compounds, there were level changes for contracts indexed to C3, the materials declined accordingly, depending on their reference dimension. The propylene reference recovered only slightly in October due to increased naphtha costs. Suppliers of standard PP might price this in on the grounds of the rather scarce supply. However, the persistently low demand is setting clear limits to the upswing. As for compounds, there is hardly any movement expected either way.
PVC: The European PVC market in September 2019 was characterised by producers passing on the pro-rata cost savings. Only for smaller volumes could producers push through demands that incorporated a slight increase in margins. Where the previous month`s prices permitted, reductions beyond the C2 price were granted in isolated cases in the further course of the month. The hoped-for revival in demand has still not come about, particularly on the German market. Processors have thus reduced their volume requirements in some cases. A FM that was declared did not cause bottlenecks in supply. Additives tended sideways to lower. Plasticiser prices continued their downtrend. With costs firming, PVC prices ought to climb higher too. No major hikes are expected, however, since buyers are acting cautiously and likely to react to high price demands by cutting back their volumes. The most likely scenario is one of producers passing on the pro-rata cost increase.
Styrenics: In September, the latest increase in the SM reference fuelled a wave of price hikes for styrenics. Producers mostly managed to enforce premiums close to the cost increase at the very beginning of the month. Later on, the oversupply situation eroded the extent of the premiums. For ABS, there were even widespread rollover agreements, especially as some suppliers offered favourable package deals. All in all, styrenics producers suffered further margin losses. Suppliers aim to put a stop to this development in October. In view of the EUR 21/t decline of the SM reference for October, they will probably at least push for a rollover. However, their success will again depend largely on supply and demand.
PET: The European PET market remained depressed in September. A brief period of disruption following the drone attack in Saudi Arabia did not have any impact on the continuing restrained demand. Warehouses are full across the entire value chain, since outflow has remained very limited for some time now. Paraxylene also slumped in August. The smaller regular transactions reported by PIE did not decline to the same extent as spot prices or the very large volumes, most of which are currently hovering around the EUR 900/t mark. The depressive mood in the market does not seem set to undergo substantial change. Following the renewed drop in the PX reference contract, further reductions are in the cards for PET notations too.