Price declines in March cast a shadow / Drastic drops in April feedstock costs throw market out of joint / Demand for food and hygiene products not disappearing
PE: Most producers factored in only part of the EUR 50/t reduction in the cost of C2 in March in order to improve margins, as polymer prices fell by an average of EUR 40/t. Whereas film grades were able to more or less stand their ground, the pressure with the injection moulding materials was higher, especially among distributors and the trade. The strong demand from the pharmaceutical and hygiene sectors for blow-moulded products also kept prices of the HD blow moulding grades stable. Coronavirus-related products were at the centre of focus for buyers, especially those from the food and hygiene sectors. On the other hand, many converters held back on purchasing because they are speculating on a further fall in prices – especially the construction segment. The EUR 200/t drop in the C2 reference for April will lead to considerable price pressure. Although producers will do what they can to limit the reduction in polymer prices to half the C2 reduction, they will probably rarely be successful in view of the overflowing stocks. For some weeks now, consumer demand for materials for the food and hygiene sectors has been booming, but this is likely to normalise a little in the next few days now that the hoarding craze has eased off. To be on the safe side, converters are now trying to spread their material deliveries over several suppliers.
PP: The decline in the propylene reference pulled PP notations downward. Due to the oversupply situation for homopolymer injection moulding grades, rebates granted for large accounts and less specified material exceeded producers’ cost relief, while the tightness for film grade allowed them to make slight margin gains here and there. Notations for compounds remained unchanged as the C3 decline was not strong enough to trigger an index change.
Converters did not exhibit a common buying strategy in the shadow of the coronavirus pandemic. While some players held back on ordering, others sought to nail down potentially needed volumes. April will afford buyers unusual chances to find bargains. The plunge in oil prices and the slacker demand during the Covid-19 outbreak knocked a hefty EUR 175/t off the C3 price. The question is how many converters will seize the opportunity, as many have cut their own output or shut down production lines. Another uncertainty is to what extent producers will be willing to pass on cost reductions and whether they will even want to let go of inventories at such low prices. Amid the pandemic, logistics could also see interruptions.
PVC: With the fall in the ethylene reference, producers’ demands for a price hike for PVC base resin in March essentially came to nothing. Slight increases were only seen in isolated cases, as a function of source and availability. A rollover resulted for the most part. With S-PVC (P), the slight price reductions for plasticiser made themselves felt, while for paste prices, the slump in demand from the automotive sector had more of an impact. In light of the EUR 200/t price drop for ethylene, price reductions are in the cards in April. One key supplier attempted to restrict reductions to EUR 50/t even before the C2 reference for April was published. Whether this proves successful or not remains to be seen. Even if the impact of the coronavirus pandemic has not yet been reflected in the order books for April, this can still happen in the form of cancellations or postponements.
Styrenics: Styrenics prices in Western Europe plummeted following the exceptional EUR 126/t decline in the styrene reference in March, undoing the increases of the two previous months. On the grounds of their eaten-up margins, producers tried to retain part of the cost reduction, with limited success. In the second half of the month, the processors’ purchasing behaviour was more visibly marked by the coronavirus pandemic. Some players did not order more than necessary because they were betting on further decreases, reducing production output due to Covid-19 or simply not wanting to tie up capital in additional inventory during the pandemic. Other market players took the opposite approach and stocked up inventories in order to maintain their supply capacity even if the situation should cut their feedstock supply. The coronavirus crisis also toppled the previous price structure, with the styrene reference for April plummeting by EUR 315/t. This dramatic drop cannot serve as a template for the upcoming price talks, as such a price level would make any polymer production unprofitable. Negotiations will then have to be conducted on a different basis. The market is clearly off the rails.
PET: The global crisis unfolding around the coronavirus pandemic naturally affected the European PET markets too in March 2020. The plunge in oil and petrochemical prices was offset by a short-term surge in demand due to panic buying by consumers, users and processors. In addition, strict border controls and the standstill at China’s ports hampered delivery. Despite this, sufficient material remained available, since warehouses were full to the brim from the previous months. The notations for the regular monthly transactions thus fell somewhat. However, producers’ margins increased since the key feedstock paraxylene underwent a clear fall in February. It was no longer a surprise to see that notations for recycled PET remained stable at a much higher level than the virgin material prices. Demand for rPET would seem to have uncoupled itself almost completely from the market for virgin PET, at least for the time being. Meanwhile, global prices for all products in the oil, gas and petrochemical markets are still in free fall. In April, the surge in stockpiling could quickly fizzle out due to the extensive social and economic standstill. China seems to be returning to normal, while in the US, the crisis is poised to spread dramatically. All the signs are pointing to a fall in PET notations, although coming up with a forecast in these exceptional times is very difficult.