Most notations show little change / PE largely rolls over / PP and PVC up slightly / PS and EPS slightly softer / Demand slack / Upturn likely in March
As in January, the European market for standard thermoplastics suffered from a fundamental weakness in demand in February. Consequently, producers were seldom able to hike prices, although PVC and PP did move up slightly. Like feedstock ethylene, most PE materials rolled over, due to lacklustre demand, despite producers´ initial calls for hikes of up to EUR 70/t. As EVA was in oversupply, prices declined slightly. The picture for styrenics was mostly the same. However, as rebates for PS and EPS were generally below the monomer decline, producers managed to improve their margins.
Supply of almost all polymers was more than adequate, even though significant production cutbacks were still in place. The consistently slack business in the regular European markets could not be compensated by exports as business was slow globally.
Demand from seasonal businesses such as building and horticulture remained especially sluggish in Europe, due to the continuing wintry conditions, while southern European business was still largely depressed. Many PE converters have reported increasing imports of inexpensive ready-to-use material from the Middle East. This has enabled them to reduce order backlogs, with a corresponding decline in purchasing. Some converters consequently are talking of extending the Easter holidays.
To make matters worse, rising oil prices in February have propelled March contract notations for polymer feedstocks substantially forward again, with ethylene up EUR 50/t and propylene up EUR 55/t. In a first barge contract, settled shortly before press time, styrene monomer (SM) was priced EUR 27/t higher, in reaction to the EUR 14/t rise in the benzene contract notation. Surprisingly, there have been a few unconfirmed reports of polymer producers targeting increases merely matching their higher costs, but many sellers will surely aim higher. This applies to PVC, PS and especially EPS building industry applications.
With the beginning of the maintenance season, feedstock supply is likely to tighten again, so that despite all efforts to plan ahead further cutbacks in polymerisation are a distinct possibility. Following a particularly long period of slackness, business, can be expected to liven up again soon. The building and horticultural segments are emerging from hibernation and converters' inventories are relatively low. The closer they get to the post-Easter business in April, the more urgently they will need to top up. In the worst case scenario, the boost in demand after mid-March could well coincide with low stock and reduced capacity use at producers. In this case, producers would have no qualms about raising prices considerably beyond the cost component. The chances are good that business in the first and second half of March will develop in two different directions.