Though prices already rose considerably, upward trend to continue / No improvement in supply situation / Plastics processors have little room to counter producers’ demands
PE: The continuing shortage of polyethylene in Europe drove up prices up for all types, in some cases dramatically. What was initially dismissed by customers as sheer fantasy on the part of the producers proved towards the end of the month to be the bitter truth: the increases for film grades were sometimes above the EUR 200/t mark. With LDPE film material, increases over the last three months have totalled nearly EUR 450/t. The order situation was mostly normal to good, whether for the food sector, the beverage industry or building products. In many cases, converters were nevertheless unable to pass on the higher polymer prices to an adequate extent. The supply situation has barely improved. On the contrary, as soon as one plant restarts production, another piece of bad news comes along from somewhere else. In addition, local production plants – especially in the US – are now also having to help out with material for America, which additionally contributes to the bottlenecks. Allocations of up to 40% of the ordered quantities are normal. For March, the cost of ethylene rose by EUR 75/t. Even before the contract was fixed, some producers had announced hikes of EUR 200/t-250/t, and it is likely that they will be largely successful. Low-priced segments can barely keep pace with this price level. A great deal will depend on whether or not imports arrive in significant volumes in May 2021.
PP: Polypropylene notations shot up steeply again in February 2021. As in January, the triple-digit hikes clearly exceeded producers’ higher C3 costs. Buoying the upward momentum was the tight market in reaction to multiple plant outages, which allowed producers to push through increases at will. Rising prices for standard PP triggered higher notations for compounds, whereby leading producers’ different calculation models led to diverging hikes. No improvement is expected in the market situation in March 2021. On the contrary, it is likely to worsen. Even if some PP plants have restarted, other important production facilities are entering maintenance turnarounds. As producers have been unable to build up inventories in recent weeks, the material shortage will drive prices substantially higher. The supply side has already announced triple-digit increases again for this month. Due to the tightness, converters will not have much scope for bargaining.
PVC: The situation remains tense, and there is little sign of improvement on the horizon. A number of PVC production lines have resumed production, but others have come to a standstill in their place. For this reason, PVC producers were able not only to factor in the higher cost of C2 (proportionate increase: EUR 35/t) and energy, but also to make up losses with the caustic soda by-product via the PVC price increases. Rising costs for the matrix material and additive components also helped to drive compound prices up. Paste prices also rose. But that is not the end of the story. The high price level will continue in March, making it the 10th month in succession to see increases. The picture will again be one of rising costs combined with strong demand and inadequate availability.
Styrenics: For months, styrenics prices have known only one direction: higher! At least for polystyrene and EPS however, the premiums in February 2021 turned out to be relatively moderate in comparison to the previous two months, which had been dominated by triple-digit increases. Suppliers broadly followed the styrene reference’s increase of EUR 24/t – often, premiums on PS slightly surpassed this mark while EPS stayed slightly below. ABS was a completely different story, however: the ongoing tight market situation continued to fuel further hefty price increases, with another round of broadly applied triple-digit premiums. As a result, prices nearly reached their previous all-time highs of March 2017. The previous record high will be surpassed in March 2021, and significantly so. The price explosion was caused by feedstock styrene: the SM reference skyrocketed, going up EUR 501/t in March. This cost catapult will launch all styrenics prices skyward. It only remains to be seen whether PS and EPS producers will be able to pass on the full extent of the drastic cost increase to their customers or not. The slightly lower cost changes of ACN (up EUR 120/t) and butadiene (up EUR 20/t) somewhat mitigate this for ABS – here too, it is going to be difficult to transfer the composite cost increase of around EUR 325/t in full.
PET: The European PET market was heavily impacted in February 2021 by the worsening turbulence in the global petrochemical and logistics sectors. Just the continuation of import problems and the onset of winter in numerous European regions would have been sufficient to hit availability and drive up prices. Then came the sudden snowstorms, with temperatures down to minus 20°C in Texas that froze giant production plants there and brought the heart of the US refinery and petrochemicals industry to a standstill. For PET producers in the US, it was, above all, the extreme shortage of MEG that was the problem. Asian suppliers seized the opportunity to fill the resultant gaps on both American continents – and obtained very good prices in the process. Europe, which is not a particularly attractive destination for sellers at the moment anyway, ended up being completely sidelined. As a result, European buyers were more dependent than ever on production lines in the region, which in some cases had to battle against internal restrictions. The fact that the supply shortages were not larger is probably due to demand also still being fairly weak. The cost mix (PX/MEG) rose by around EUR 50/t, and producers were consequently able to push through increases of about twice that amount and thus gain substantial margin increases for the first time for many weeks. As things stand, it seems there will be further price hikes in March. The imbalances in the global petrochemical industry will not disappear immediately. Even if the rate of cost increases declines a little, further rises can nevertheless be expected. As far as imports are concerned, there is also no immediate prospect of the situation easing up. Coupled with a pickup in demand at the start of the spring season, price increases are probably inevitable.