Commodity plastics prices go into melt down

These are turbulent times for polymer markets. Prices are plunging following the massive decline in crude oil and feedstock costs. Meanwhile, demand is virtually at a standstill as consumer confidence collapses as a result of the credit crunch and the developing economic recession in the major European markets. Suppliers have also been slow to make production cutbacks and material availability remains high.

The polyethylene sector has experienced the most dramatic price falls with notations down around €400/tonne since the end of September. Polystyrene was down €250/tonne last month after a remarkable decline of €483/tonne in the cost of styrene monomer.

Continued turbulence in the PET market has sent prices spiralling downward by €180/tonne during the last two months. PP and PVC prices have also dropped but not so much as other polymer classes.

The immediate outlook is for further downward price pressure. Demand will remain very weak as many converters plan a prolonged shutdown over the holiday period.

L/LDPE plummets as processor demand crumbles

The European polyethylene market is in turmoil with prices plunging and demand virtually drying up. In October, L/LDPE prices fell by €240/tonne and continued to slide last month with notations down by a further €160/tonne.

Demand has collapsed over the last two months with converters engaged in severe de-stocking due to falling end user demand and an expectation that PE prices will slide even further.

Producers have responded to the dire demand situation by reducing operating rates and in some cases shutting down facilities. Despite production cutbacks, stocks at producers remain high due to the lower sales volumes.

European PE producer efforts to achieve better market balance have also been undermined by diversion of Middle East cargoes to Europe due to the meltdown in Asian PE markets.

With many converters planning to close down from mid-December, prices will fall further this month.

Market oversupply pushes HDPE prices down again

High-density PE prices have fallen by over €400/tonne over the past two months as a result of weak demand and plentiful supply. The fall has been most felt in the market for injection moulding grades with blow moulding not far behind.

Demand remained extremely weak in November despite the steep price reductions. Converters are de-stocking due to low final demand and anticipation of further price falls.

Producers have responded to the over-supply situation by reducing operating rates and closing down production lines. The volume of imports into Europe from the Middle East has, however, grown due to the collapse of HDPE demand in Asia.

December is unlikely to provide any respite for HDPE producers. Continued demand weakness and over-supply should push notations even lower.

PP suppliers forced to concede big discounts

Polypropylene producers were forced to give away further price concessions last month in order to reduce their stock levels before the end of the year. Direct purchases dropped between €80-100/tonne while traders offered even bigger price discounts. Producers have lost significant margin over the past two months, since the C2 contract price was settled €62/tonne lower.

There is still plenty of material available and producers are curbing operating rates and in some cases temporarily shutting polymerisation facilities to manage inventories.

Demand for film grades held up but injection moulding grade demand was down.

PS prices fall as feedstock prices and demand drops

At the beginning of November PS prices were dropping around €150-200/tonne, which was in line with producer price announcements. However, it soon became apparent that notations would have to fall further in light of the dramatic reduction of €483/tonne in average styrene monomer (SM) contract price. Towards end of November general-purpose grades were being offered at discounts of €250/tonne compared with October.

Producer stocks have come down in recent months due to production cutbacks, but demand remains very weak with severe de-stocking by many converters.

SM costs, and hence PS prices, are predicted to fall sharply once again this month.

PVC falls as suppliers resin stock levels swell

PVC suppliers were hoping to limit price reductions to half the €108/tonne reduction in ethylene contract price during the final quarter of the year. However, notations drifted €50/tonne lower in October and fell by even more last month. In November, S-PVC pipe grade prices were around €70-80/tonne lower than in the previous month.

PVC demand has been falling at a faster rate than producers could reduce stocks. Most producers have cut plant operating rates between 30-60% over the last few weeks to reduce swelling stock levels. There are also reports of a growing volume of imports in Southern Europe.

Demand has crumbled in key sectors such as construction and automotive as the economics slowdown takes its toll. Converters are also de-stocking in expectation of even lower prices over the next few months.

Producers can be expected to make further price concessions this month.

PET's continues its dramatic downward price slide

PET prices continued their downward slide in November as producers were forced to give further concessions in light of widespread material availability, lower feedstock costs and very slack sales.

PET bottle grade resin prices have fallen by €130/tonne since mid-October. There has been a trend for contracts to be settled later in recent months due to the late settlement of the paraxylene (PX) contract price, a key benchmark for PET price negotiations. At the time EPN went to press, there was the expectation that PX would settle significantly lower in November.

Demand weakness persists with year-to-date European PET consumption down at least 5% compared with the same period last year. Lower bottled water sales, particularly in France and the UK, is one important reason for the downturn in PET sales. Poor weather and lower consumer confidence are also contributory factors.

The PET market is still well supplied despite some plant closures and operating rates being reduced to 50-60%.

The market outlook remains gloomy for suppliers. Prices are expected to fall further in December and buying activity is unlikely to pick up soon.