Month defined by supply bottlenecks and allocations / Feedstocks drive prices / Upward trend likely to continue in February albeit less dramatically
PE: In January, producers won significant margin improvements on top of the feedstock cost increase for the majority of the polyethylene types covered by this report. Particularly affected were LDPE and LLDPE (C6) film materials and – to a lesser extent – the pipe grades. With the cost of C2 rising by EUR 65/t, producers sought increases of up to EUR 200/t. They justified their demands with the tight availability and the high price level on the other world markets. Converters very often had to accept the increases because of a threat hanging over their heads of their volumes being reduced. It is not surprising that, in these circumstances, there was also some talk of “extortion”. Whereas in the first half of the month, there was still a tendency towards stockpiling, this was later increasingly rejected by producers. The poor supply situation with some materials also contributed to this, and many customers were put on allocation. For February, producers have once again tabled demands for increases of up to EUR 200/t, with ethylene rising by EUR 70/t. With availability often very poor, it is probable that a lot of these increases will go through. The fundamental problem here is a structural one. The currently low refinery activity also means a lower output of olefins. The overall tendency to secure volumes is only likely to meet up with resistance in the case of low-price grades, where converters will take their foot off the accelerator and no longer be willing to pay absolutely any price. Although some imports are expected soon, they will probably not arrive until March 2021.
PP: The upward momentum in polypropylene prices seen in December 2020 continued into January 2021. Aided by market tightness on the back of strong demand, producers were able to ram through hikes well out of proportion to the higher C3 contract. The increases for standard PP also triggered a change in the index for compounds. For February, on the contrary, no relief is in sight. The monthly C3 reference contract added a further EUR 85/t, but PP producers won’t leave it at that. Some suppliers had already formulated hikes ranging up to EUR 250/t before another force majeure in the Czech Republic rocked the market. Compounds will also feel the trickle-down effect of this.
PVC: The upward trend in PVC prices continued unabated in January 2021, rising for the eighth month in succession. They were driven once again by the tight market situation and the still-lively demand. As a result, producers of PVC base materials were able to lift prices yet again above the proportionate C2 cost increase. Compound prices, on the other hand, rose largely in line with the cost increases. The PVC supply situation improved only slightly, and for February 2021 the availability prospects are still dismal. With demand expected to continue to be lively and the cost of C2 higher again (up EUR 70/t in February), further increases are more or less on the cards for February. This means that the price boom will inevitably continue into its ninth month.
Styrenics: The price boom continued unabated in January 2021. The increase in the styrene reference of EUR 108/t fuelled the next instance of the price rally in polystyrene and EPS – in the case of PS, the increases were often slightly higher than the SM cost change, while the premiums for EPS lay slightly lower in most cases. ABS, meanwhile, has already largely decoupled from feedstock prices. A severely limited supply made prices soar, to between EUR 200/t and 300/t. In February, prices are likely to trend further upwards, albeit much less dynamically than recently. The stimulus for this, at least in the case of PS and EPS, is the recent increase in the SM reference: in February, it rose EUR 24/t. For ABS, by contrast, the continuing tight-market situation dominates the situation, and prices are expected to move above the increase in composite costs of around EUR 30/t (SM up EUR 24/t, butadiene down EUR 25/t, ACN up EUR 104/t). However, some producers plan to be modest in their demands so as not to overstep the mark after the massive price increases since November 2020 – “A good shepherd should shear his sheep, not skin them”, as the Roman emperor Tiberius purportedly advised one of his governors.
PET: Significant increases in feedstock costs drove European PET prices higher in January. Fears expressed by market observers were confirmed both with paraxylene, where contract prices rose through December and January by EUR 85/t, and with MEG, which increased by EUR 100/t in January after several months of stability. The global turbulence on the oil and petrochemical markets has also put the PET market under pressure. Since imports from Asia once again failed to appear due to low arbitrage and exploding transport costs, buyers were largely limited to domestic European supplies. Spot prices responded with marked increases and in January were even significantly above the large contract orders tied to the price of PX. Most of the cost increases also went through with the regular business in the medium to small volume segment reported on by PIE. Though demand is still generally trending weak, buyers simply had no choice but to accept the increases. There are first signs from Asia of the situation calming down due to the Chinese New Year – despite travel restrictions imposed by the Chinese government – as well as the imminent new PX capacities and stabilised oil prices. Still, the European market could see further increases in February for precursor products. A largely unchanged supply situation with few imports means these hikes will certainly be passed down the line. Depending on the demand situation, it is also possible that producers will gain a small margin increase.