Almost all grades reach a plateau in June / Situation remains difficult in undersupplied PVC and ABS markets / Notable price corrections expected in July
PE: The vast majority of PE prices neared their zenith in June. After rising for several months, LDPE film and several HDPE types retreated, and sellers of other grades had to be content with increases below the C2 cost rise of EUR 30/t. Only in extremely tight markets, such as LLDPE (C8), HDPE pipe and EVA, were producers able to push through price hikes equivalent to or above the rise in the cost of monomer. With most other materials, supply remained tight, although there was improvement with the arrival of the first imports and the restart of some European production plants after maintenance turnarounds. The trend towards a better supply situation is likely to continue in July. As a result, and because the previous cost level was extremely high, most PE prices will presumably fall slightly or at least remain at their previous month’s level despite the latest rise in the cost of C2 (up EUR 40/t in July). At the start of Q3, market players can only expect increases for EVA and, following the unscheduled outage of a European production plant, HDPE pipe 100.
PP: Soon, there will be no more wiggle room at the top end of the price chain. The already-high levels along with the improving supply situation will limit the upward potential for standard polypropylene. In June 2021, producers were only able to factor in the EUR 40/t rise in the C3 contract for certain grades. Others rolled over. For compounds, it was a different story. Here the C3 increase pushed contracts indexed to the monomer a notch higher. For freely traded volumes, the upward curve was even steeper, due to higher prices for additives and fillers. Demand varied from product to product. While buyers of standard PP, in view of the higher costs, covered only their immediate needs, compounds continued to see brisk ordering by the automotive and white goods sector. But here, too, demand should begin ebbing over the next few weeks, as the automotive industry, facing a shortage of semiconductors, will have to curb production. Despite this, the new C3 contract agreed for the third quarter will drive prices for compounds farther upward. On a brighter note, the months-long rally for standard PP should come to an end in July. The improving supply will set price corrections in motion despite the higher C3 reference contract.
PVC: The cost surge is still ongoing, with PVC prices continuing their unabated upward trend in June 2021 and setting new all-time highs. Demand remained brisk, especially from the construction sector. The driving force, however, was once again the tight supply situation, with the increase in the C2 reference (+EUR 30/t) playing no more than a secondary role. However, there are now growing signs of the supply situation improving. Several European producers have brought their plants online again, or are poised to do so, and the foreseeable increase in exports promises further relief. Although this is unlikely to bring the upward trend in prices to a halt in July, it will at least lose some of its momentum.
Styrenics: The wheel keeps turning – but now, it is taking the other direction. After several months of extreme bullishness, during which prices reached record highs, the styrenics costs began to fall in June 2021. They thus followed the overdue correction of the styrene reference, which fell by EUR 401/t after the steep bull market of the previous months. EPS suppliers took advantage of the strong demand and tight supply situation by retaining large parts of the cost reduction. Polystyrene producers tried something similar, but with much less success. After some producers tried to regain market share with discounts at the level of the SM reduction, other players also readjusted their price reductions, so the scope of discounts was noticeably widened in the course of the month. Meanwhile, ABS suppliers deviated comparatively less from their price expectations – the lack of imports and the associated scarcity continue to play into their hands. Styrenics prices are likely to decline further in July, especially as the styrene reference again fell sharply at the start of Q3 (down EUR 208/t). The producers’ approach is likely to be similar to the one in June: they will once again try to pass on only a proportion of the cost reduction to the market to further improve their margins. And once again, their success will depend largely on the supply situation and further price expectations for the next month.
PET: The price bubble for PET in Europe, which has been gaining pace over the past few months, deflated somewhat in June, as expected. Production in Europe returned to normal, and the direct feedstock of PTA was available in sufficient quantities once again. Despite the rather hot weather of late, demand did not pick up to the extent that suppliers had hoped for. Converters were still able to readily cover their requirements from stocks. European supplies thus proved to be more than adequate, and the continuing weakness of imports had no major impact. In most cases, the price reductions achieved for the regular, small and medium purchase volumes reported on by PIE were between EUR 30/t and EUR 50/t. In the case of large purchases, rollovers have mainly been reported, due in part to the link with feedstock products in this field. Slightly increasing notations even resulted in isolated spot transactions. A continuation of notations at their current level would seem to be the most likely scenario for July, the first full month of summer. A briskening of demand is expected in many cases, but this will be largely met from European production. The fourth pandemic wave emerging in Portugal is still, however, looming threateningly on the horizon.