Commodity polymer price downturn gathers pace in October
During October, all classes of standard thermoplastics registered a further large price reduction. Q4 feedstock contract prices were, as expected, down sharply after the collapse in crude oil and naphtha prices during the third quarter. On top of this, demand was extremely weak across most sectors and markets were very well supplied.
Polyethylene saw the biggest discounts with HDPE grades down €110/tonne, LDPE down €100/tonne and LLDPE down €90/tonne from September settlements. Polystyrene prices were cut by €70-80/tonne with the price of all other polymer classes falling by around €50/tonne.
Polymer demand remained sluggish in October. Converters are buying only sufficient material for their current production needs and it is clear that end user demand has slackened considerably as a result of the economic malaise.
Producers are responding to the over-supply situation by either temporarily closing plants or slashing operating rates. However, it is difficult to imagine a scenario where producers will be able to prevent prices from slipping further before the end of the year.
L/LDPE prices plunge on weak demand
L/LDPE prices plunged in October after a sharp reduction in the Q4 ethylene contract price and extremely subdued demand. Notations for LDPE film grades were down by €100/tonne compared with the previous month, with LLDPE butene grades falling by €90/tonne. This means that polymer producers gave away virtually all of the €108/tonne reduction in the ethylene Q4 contract settlement in October.
Demand remained very weak last month, following poor order intake for the previous two months. The demand malaise appears to be more due to weak end-user demand rather than stock issues. Converters are also reluctant to buy until there is greater clarity over future pricing trends. Even low-priced imported material available through traders has failed to generate additional demand.
Lyondel/Basell, Dow, SABIC and Borealis have responded to an imbalance between inventories and order intake by making production cutbacks in the region of 10-20%.
With very limited prospects for an upturn in demand before the New Year, L/LDPE prices look set to fall further over the next couple of months.
Sharp downturn for high-density PE numbers
High-density PE grades saw even greater price slippage than L/LDPE last month, with notations down by €110/tonne compared with September settlements. This meant that all of the €108/tonne ethylene cost reduction was wiped out in the first month of the fourth quarter.
HDPE polymer sales remained extremely poor across the board in October due largely to weak end-user demand. Stocks at local suppliers are high and traders are very active. In November, additional volumes of standard injection moulding grades are due to arrive from the Middle East, which is likely to put further pressure on European prices.
Despite their intention to hold prices, suppliers will be hard-pressed to resist further price rebates in November. Stocks are high, imports are growing, and there is no sign of a demand upturn on the horizon.
PP resin prices fall lower
The downturn in polypropylene prices gathered momentum towards the end of September and prices continued to fall last month. For October, PP prices dipped by a further €50/tonne, which almost wiped out the producer margin gain from the reduction of €62/tonne in the Q4 propylene contract price.
Demand picked up last month following the fall in C3 costs, but was still below expectation. Material availability from local suppliers was high and traders were very active. Given the high stock levels and relatively subdued demand, PP producers are likely to make production cutbacks over the next few months.
Without decisive action to reduce stocks, the outlook is for further price erosion in November.
PS sales fall, dragging prices lower
PS prices were down by €70-80/tonne in October following a €97/tonne fall in the cost of styrene monomer. Producers say they plan to increase the price gap between GPPS and HIPS from €60/tonne to €80/tonne because of the expensive butadiene component.
The PS sector remains well supplied and the demand downturn is accelerating. Over the last two months, PS sales were 20-30% lower than the same period last year. Year-to-date sales are down by around 10% over the same period last year. This sales slowdown reflects subdued orders for consumer markets and ongoing economic uncertainty.
In an effort to restore better market balance, Ineos Nova has reduced operating rates by 30% and BASF by 25%.
PVC prices take a tumble
In October, PVC suppliers' plans to hold prices at September levels failed and they had to concede price rebates of between €40-50/tonne. There were reports of even larger price reductions from producers with the highest stock levels. The October price fall means that producers have already given away the impact of the C2 cost reduction on PVC production.
PVC order intake was slightly better in October after the fall in feedstock costs, but was still below normal for the time of year. Packaging film was the worst-performing sector due to continuing competition from polyester film and growth in pre-packaged products from Asia. The pipe and profile sector is also starting to be squeezed by the economic downturn.
The PVC sector is well supplied with no reports of plant outages or production cutbacks in October. However, as demand is expected to remain sluggish during the winter months, PVC producers may consider reducing operating rates to bring about better market balance.
Slow PET demand sees prices slide
Over the last two months, the European PET market has faced growing uncertainty and a lack of clarity over pricing trends due to delayed settlements of the paraxylene (PX) contract price. An initial PX settlement was, however, finally agreed during early October, showing a decrease of €145/tonne. The settlement was at least €50/tonne lower than many PET market participants were anticipating, leading those who had settled expecting a smaller drop in PX costs in September to call for higher rebates in October.
October PET resin prices in Western Europe drifted €50/tonne lower following an average price fall of €80/tonne in the previous month. For North America and Asia, the price reductions are even more substantial as the economic slowdown takes its toll on final demand.
Western European PET sales are lower this year than last. One of the principal reasons is a reduction in demand for bottled water as consumers' discretionary spending has been curbed by rising food and energy prices. Lightweighting of PET bottles and growing use of recycled PET are other limiting factors.
The PET market is well supplied and worldwide producers are reducing operating rates to curb inventories.