Commodity plastics prices ease; further falls expected

Market Summary

For September, all classes of standard thermoplastic, with the exception of PVC, drifted lower, largely due to a sharp reduction in demand. Converters were reluctant to commit to buying any additional volumes given the reduction of around a third in crude oil prices since their peak in early July. The Q4 contract prices for polymer feedstock are widely expected to fall sharply with sizeable reductions in polymer prices also likely this month.

Polymer producers were asking for higher prices at the beginning of September but soon had to shelve their plans as demand dried up. Last month, polystyrene and PET prices were €50/tonne lower compared with the previous month following sharp falls in feedstock costs. L/LDPE and polypropylene were down by €30/tonne while HDPE was €20/tonne lower. PVC managed a price rollover.

Material availability was good for most polymer classes last month. Producers are responding to the over-supply situation by reducing plant operating rates or temporarily shutting down capacity to achieve a better market balance.

HDPE buyers force mark downs

Producers' calls for price increases of €50/tonne soon evaporated last month once it became clear that demand would be very weak. Even producer efforts to maintain a price rollover from August levels was shelved as notations slipped by €20/tonne across all HDPE sectors.

Order intake was poor as converters held back from making unnecessary additional purchases ahead of the expected reduction in ethylene and PE prices during the final quarter of the year. The slowdown in consumer markets is also beginning to affect polymer purchases.

The HDPE sector, like L/LDPE, is long and producers have responded by either reducing plant operating rates or temporarily taking plants out of production in order to better match demand and supply. This is unlikely to prevent prices falling further in October.

Weak demand eases L/LDPE lower

In September, extremely weak order intake soon put paid to producers' calls for further price increases of €50/tonne. Buyers were not prepared to accept any further rises following the record hikes for L/LDPE prices in August. With crude oil prices down by a third since their peak in early July the expectation is that the Q4 ethylene contract price will be settled at a much lower level. This in turn is likely to lead to lower L/LDPE prices during the final quarter of the year, provided of course that there are no major unexpected events to destabilise the market. Converters were therefore running down their stocks last month with much lower prices on the horizon. Cooling Western European economies are also holding back demand.

Last month, L/LDPE prices slipped by up to E30/tonne with only the higher value C6/C8 LLDPE grades holding firm. There was plenty of standard L/LDPE film grade material on offer and producers started to make production cutbacks to bring the market into better balance.

PP slides on slowing demand

At the beginning of September producers were asking for a price increase of E30/tonne to bolster margins following the substantial price hikes of the previous month. It soon became apparent, however, that further price increases would not be achievable as demand was extremely subdued. Even plans for a rollover had to be shelved as notations started to slip. By mid-month, prices were down by €20-30/tonne with the possibility of further slippage as the month progressed.

Buyers were holding back from making additional purchases because propylene is expected to be much cheaper during Q4 and they were running down their stock levels. In response, PP producers began to trim production.

PS prices tumble; margins fall

September was a challenging month for polystyrene producers with low demand, falling margins and tumbling prices. Producers were initially seeking to improve margins with a price rollover after the September styrene monomer price dropped by €32/tonne.

This proved to be a non-starter with order intake extremely slack last month following ‘dreadful' August sales.

Producers were forced to mark down prices or risk losing market share given the plentiful supply of material on offer. Prices dipped on average by €50/tonne, but some buyers managed to gain concessions of up to €70/tonne.

Buyers are holding back from purchasing PS in the belief that styrene monomer and PS prices will tumble this month.

PVC sellers fail to secure increases

PVC sellers failed to meet their goal to raise prices by up to €40/tonne in September. Unlike other sectors, where prices actually fell last month, PVC managed a rollover or even small price gains of around €5/tonne.

PVC demand was by no means quite as bad as most other polymer sectors, being more or less in line with market expectations last month. Pipes and profiles in Central & Eastern Europe, where construction activity is strongest, was one of the best performing sectors. PVC sales to West European construction sector suppliers were somewhat weaker last month.

The supply situation for PVC is well balanced at the moment with producer stocks now at more normal levels. There were, however, reports of Chinese and North American material being available at attractive prices.

This month, PVC producers are likely to find it tough to hold prices at current levels given that feedstock costs, most notably ethylene, are widely predicted to fall sharply.

PET prices ease as sales disappoint

For September, the key PET feedstock costs, paraxylene and MEG, were being fixed late, but were widely expected to settle much lower than expected at the start of the month. Consequently, PET producers were forced to make larger price concessions than originally planned and notations were off by up to €50/tonne. It is unclear at this stage whether this represents a margin gain or a loss for producers.

Last month, demand for bottle-grade PET resin was a little better than the very poor August sales. The cool summer weather in Western Europe is having a dampening effect on sales of soft drinks in particular. UK bottled water sales are down this year largely due to the effect of the credit crunch on consumer spending.

At the same time, supply is good and producers are either reducing plant operating rates or temporarily shutting down capacity to achieve better balance between supply and demand. Equipolymers declared force majeure for its 150,000 tonnes/year PET plant at Ottana, Italy, due to “unexpected and unforeseeable” problems with its main air compressor motor. The plant is due back on stream at the end of this month.