The resin price calm after the storm
Standard thermoplastic markets were much calmer in January, following the dramatic price developments seen in Q4 2008. Producers were maintaining a tight rein on production while buyers were taking a cautious approach and seemingly in no rush to replenish inventories.
The introduction of monthly contracts for ethylene and propylene in January added to market uncertainty for the polyolefins sector. It remains to be seen for how long this practice will last.
Sellers were desperate to stabilise the market and were initially calling for a price rollover. However, a combination of weaker than expected demand and plentiful availability led to modest price erosion for most polymer classes.
L/LDPE prices were largely stable, while HDPE prices, with the exception of blown film, were stable at the lower end of the price spectrum with more substantial price concessions being given to customers already paying higher prices.
PP sellers also gave some concessions to customers paying higher prices, while PS, PVC and PET prices were down in line with feedstock cost development.
L/LDPE prices may be close to bottoming
In early January there were signs that L/LDPE prices were bottoming out following the price collapse during Q4 last year. Producer calls for price increases of up to €80/tonne merely succeeded in stabilising the market.
The price spread for LDPE grades narrowed as customers paying higher prices gained concessions of €20-30/tonne compared with December contract settlements. LLDPE butene grades were largely unchanged but higher-quality grade prices declined further.
There is a better balanced supply situation for L/LDPE following the production cutbacks made by producers. Some sellers report an inability to supply all grades all of the time.
Demand was very sluggish in early January, but was expected to recover to closer to normal levels as the month progressed. The C2 contract price was settled in January on a monthly basis in view of the continued volatility in crude oil and feedstock prices. C2 was down €600/tonne at €520/tonne.
HDPE price spread narrows down
HDPE producer calls for price increases of between €50-80/tonne largely fell on deaf ears in January, although one producer reported small price gains.
With an exceptionally wide price spread in December, there were reductions seen at the top end the price range for injection moulding and blow moulding grades and falls of €30/tonne for blown film grades across the whole price spectrum.
Supply remained good last month, despite the production cutbacks made by producers. Additional supplies of imported injection moulding material was also widely available.
Demand remained sluggish, but was slightly better than the previous month. Packaging was the only sector where sales were anywhere near normal levels. However, converters continue to exercise great caution in their purchasing behaviour due to liquidity concerns and uncertainty over pricing trends.
PP softens as converters reject rollover
Producer efforts to pursue a price rollover were thwarted by converters in January. Buyers managed to achieve price concessions, particularly those at the top end of the range who had not yet benefited much from the price slide of recent months. There were also losses at the lower end of the price scale for homopolymer film, down €20-30/tonne.
Demand was weak last month, although better than the December. Packaging was the only sector where sales were near normal levels. Resin production plants are still running at well below normal rates and the ability to supply varied between producers.
A monthly C3 contract price was settled in January, with the number down €523/tonne to €430/tonne.
PS producers predict a price upturn
January began well for PS sellers, with brisk demand as converters started to rebuild their inventories. However, PS prices soon came under pressure once news emerged that the first styrene monomer (SM) contract price had been settled down €47/tonne at €555/tonne. Producers were forced to give price concessions but managed to limit the decrease to €40/tonne, and so preserve the margin gains made during Q4 2008.
Demand in January was reported as being 20-30% better than the September-November period but still less than the same month last year. With spot SM prices rising and better balanced PS supply and re-stocking by converters, sellers say they are optimistic for a price upturn in February.
PVC sellers hold prices to offset weak sales
PVC suppliers were seeking to minimise the impact on prices of the €600/tonne drop in the ethylene contract price for January.
Producers had already given away a large proportion of the C2 decline during Q4 last year, but there was still some room for manoeuvre. PVC profit margins were squeezed last year, before the gains made during the final quarter.
Sellers were, however, prepared to make price concessions of no more than €50/tonne and at least maintain margins, when it became clear that sales were not recovering as hoped.
Demand was very disappointing across the board in January, with the construction sector suffering more than any other due to bad winter weather as well as the economic downturn curbing activity. Supply of PVC is good with plenty of material available.
The PVC price outlook for February will crucially depend on what happens to the monthly ethylene contract price and whether market demand improves.
PET suppliers “hopeful” for demand upturn
The New Year started slowly for the European PET market with both buyers and sellers adopting a cautious approach.
Producers initially hoped for a price rollover to obtain a much needed improvement to their profit margins. And there was some cause for optimism as production rates had been reduced during Q4 2008 and stock levels were much better balanced with the lower levels of market demand.
In practice, however, there was some small price erosion with notations down around €10-20/tonne at the lower end of the price spectrum. There were much bigger price concessions made for customers at the higher end of the price scale.
The PET price spread has widened in recent months due to the long delays in settlements of the paraxylene (PX) contract price. For January, the first PX contract price was settled early, down €25/tonne to €500/tonne. PET sellers are hopeful for an upturn in demand over the coming months as converter stocks are low and the main PET bottle manufacturing season is just around the corner.
PET plants continue to produce at low rates. Meanwhile, Equipolymers restarted its PET plant at Ottana in Italy after four months downtime.