Buyers resist producer price hikes
Strong buyer resistance soon put paid to producers' target price increases in April. Those converters with sufficient stock simply refused to buy at the prices being asked. With good material availability across all polymer types, sellers had to give way and accept much smaller price increases.
Polystyrene saw the biggest monthly price gain (up €80/tonne) following a sudden surge in the styrene monomer and benzene contract prices. Polyethylene producers initially called for price hikes of €80/tonne to recoup lost profit margins.
Buyers were stunned by such demands, especially as the April C2 contract price was unchanged from the previous month, and sellers reluctantly had to accept price increases of €20-30/tonne.
Polypropylene is the best performing sector with improving sales and margins. The PVC sector is regaining some stability, with prices being rolled over in April. PET, however, continued to struggle with no discernable sign of a sales upturn on the horizon.
For May, sellers are again expected to call for higher prices as they continue their attempts to improve profit margins.
Converters resist HDPE price rises
Buyers of HDPE strongly resisted sellers' attempts to raise prices by a significant amount last month.
Sellers were targeting price increases of €80/tonne to improve their profit margins. However, only very moderate increases were achieved, with notations creeping up between €10-20/tonne.
Buyers were unimpressed by calls for such a large price hike, especially as the April C2 contract price was unchanged from the previous month. Many converters refused to buy at the prices being asked by sellers and are working from lower stock levels.
Hence, sales were well below what would normally be expected for the time of year. Beverage caps and closures was the most stable end use sector.
Availability was well balanced with the lower demand levels following the measures taken by producers to curtail production.
L/LDPE falls well short of producer target
Producers called for price increases of up to €80/tonne last month in an attempt to restore their profit margins to a more acceptable level.
A combination of weak demand and an unchanged ethylene contract price however, restricted actual price development to well below this target. By mid-month, LDPE prices were trading up to €30/tonne higher than in March with a slightly lower rise for LLDPE film grades.
L/LDPE demand remained weak with converters working from stock and buying only as much as they absolutely require for current production. Polymer sales were also depressed as many converters closed down for an extended Easter break. Packaging film for food and stretch film for beverages have been performing well.
Supply of standard film grade is good, despite production cutbacks. In addition, LyondellBasell is planning the closure of its 110,000 tonnes/year LDPE plant at Fos-sur-Mer, France, and Sabic will close its 120,000 tonnes/year autoclave LDPE plant.
PP edges up as producers cling to strong margins
PP producers were reluctant to see any of the margin improvements they gained during Q1 to disappear last month and pressed for another moderate price increase of between €20-30/tonne.
They only managed gains of €10-15/tonne, largely at the bottom end of the price range. But given that the April C3 contract price was unchanged, this represents a further margin improvement.
European demand for PP is getting stronger month by month, but was still around 15% below what would normally be expected for April.
PP sales were again boosted by growing exports to Asia last month. The offer is well balanced but producers have started to lift operating rates due to growing order intake.
SM price increase shocks buyers
There was a surprisingly sharp increase in the average April styrene monomer (SM) contract price, which settled €88/tonne higher at €720/tonne. The sudden spike in SM costs reflected good buying interest and higher benzene prices.
Benzene prices were supported by short covering after surging Asian prices raised the possibility of exporting some of Europe's supply overhang.
PS suppliers were calling for price increases to cover the hike in SM, but weak demand and good material availability limited the PS price rise to between €70-80/tonne. Converters with sufficient stock refused to buy at the prices being asked. As a result, April PS order intake was reported to be even worse than depressed March levels.
PVC prices rollover to stabilise the market
In April, PVC producers seemed somewhat more optimistic that they are managing to at least stabilise the market. Prices were more or less rolled over from the previous month, but there were signs here and there of a slight upward price movement of between E10-20/tonne.
PVC profit margins were severely squeezed during Q1 and producers are cautiously trying to pass on the higher feedstock costs. Customers are, however, still not buying sufficient volumes due to the depressed condition of the construction and automotive sectors in particular.
Material availability was good with only minor shortages reported for certain specialty grades. The Shin-Etsu plant in The Netherlands restarted production in early April after a temporary shutdown for planned maintenance.
Producers are pinning their hopes on the various national economic stimulus packages aimed at kick-starting construction sector activity in the near future.
PET sales upturn fails to materialise
The long awaited revival in PET bottle grade resin sales failed to materialise in April, a month that would under more normal circumstances represent the peak of the buying season.
Demand was extremely sluggish, with converters working from much lower stock levels than normal and only buying sufficient material to satisfy their current production requirements. Lower mineral water and CSD sales, downgauging of PET bottles and growing use of recyclate all contributed to the continuing market malaise.
The offer was well balanced with the lower demand levels following action by producers to reduce operating rates and shut down capacity.
However, last month's market situation was hardly conducive to a price rise.
Producers on the whole had to settle for a price rollover, although there were reports of small price increases and even some price reductions. Producers were hoping to at least recover a €10/tonne increase in the cost of feedstock for April.
This month could see a tightening in feedstock availability and a firming up of costs. In April and May, both Ineos and BASF are planning scheduled maintenance at one of their MEG plants. PTA is also tightening.