Supply concerns lift prices
European polyolefin prices registered triple-digit price increases in September as the supply restrictions caused by various planned and unplanned cracker outages further shortened feedstock availability.
L/LDPE and polypropylene prices were between €100-110/tonne higher last month following sharp hikes for the monthly C2 and C3 contract prices. HDPE prices increased between €90-100/tonne. Sellers were also determined to seize the opportunity to restore profit margins to more acceptable levels. Converters that required additional material had no choice but to pay the significantly higher prices being quoted.
PVC was also up sharply due to higher costs and production outages. Polystyrene, on the other hand, saw a price decline due to much lower benzene and styrene monomer costs. The PET sector is softening but notations remained unchanged last month.
Demand levels continued to show a gradual improvement but remain well below what would normally be expected. Converters are buying only sufficient material to meet their immediate needs and waiting to see if prices start to fall.
L/LDPE surges as supply tightens
L/LDPE producers achieved their targeted price hikes of €100-120/tonne in September without too much resistance. LDPE prices were up around €1110/tonne with low-density grade prices rising by €100/tonne. Prices are being driven higher by the escalating cost and tightening availability of ethylene. The ethylene feedstock increased by €80/tonne to €875/tonne last month. Producers justified the price premium being asked on the basis of an urgent need to repair their battered profit margins.
The ethylene supply situation is becoming extremely uncertain. Additional crackers are being mothballed due to the economic downturn, including the Ineos subsidiary Naphthachimie in Lavéra, France since 5 September. There are also outages at several PE production units and producer stocks are at historically low levels following earlier production cutbacks.
In September, L/LDPE demand was slightly better than August, but remains fragile. Converters are minimising stocks due to stagnating end use markets and high polymer prices.
Large gains for high-density PE
HDPE producers managed to meet their targeted price increases last month with notations rising between €90-100/tonne. Blown film grades, which are facing very tight supply, showed the strongest gains, while injection moulding and blow moulding grades increased by slightly less, due to availability of imported material. The September price increases meant a small margin gain for producers following an €80/tonne rise in C2 costs.
HDPE supply is tightening as a result of cracker and PE production plant outages. Producers' stocks are being maintained at very low levels with only sufficient availability to meet regular customer orders.
Demand was somewhat better in September than August. The may be explained however by converters, which themselves are operating from low inventories, starting to restock following the holiday period.
Polypropylene producers targeted price increases of €140/tonne in September to cover the €93/tonne rise in C3 costs and repair profit margins. Converters put up very limited resistance to the prices being asked and PP notations increased by €100-110/tonne during the month. Film grade prices registered the highest gains due to livelier demand.
PP availability is very tight as a result of refinery and cracker shutdowns, on top of the earlier production cutbacks at PP production plants. The situation is unlikely to improve until at least November when a number of crackers are due to restart production.
Buyers are unlikely to get any relief from imported Asian material this month as uncertainty surrounding European PP prices is deterring exports.
PS down as costs plunge
PS producers were initially targeting a price roll over last month but were quickly forced to backtrack as BASF announced a €25/tonne price reduction following sharp falls in feedstock costs. The benzene contract price for September declined by €168/tonne and styrene monomer was €84/tonne lower. Sellers conceded between €30-35/tonne but are determined not to give away any larger price reductions.
There is sufficient material in the market to meet the current subdued demand levels despite the production cutbacks and supply restrictions.
In a further industry move to reduce excess capacity in the European PS market, Ineos Nova announced that it will cease producing polystyrene at its Breda, The Netherlands site by the end of the year.
PVC supply worsens
Tightening supply and rising cost pressure lifted PVC prices in September. Producers originally targeted price hikes of €100/tonne to cover the large rise in ethylene and chlorine costs and to make a contribution to profit margins. Standard pipe grades managed gains of €80/tonne with higher quality film and cable grades rising by €70/tonne on weaker sales volumes.
Material availability is tighter as a result of cracker and PVC plant outages. These include the cracker shutdown at the Ineos subsidiary Naphthachimie in Lavéra and Arkema's announcement of force majeure for VCM and all PVC lines in France.
Demand has picked up gradually as the year has progressed but remains well below the level of previous years.
The Arkema force majeure could cause severe supply problems for the PVC sector were demand to suddenly pick up over the next few months. Pricing trends this month will be determined by cost developments but availability will remain a key factor.
PET shows signs of softening
The European PET market could be about to enter a phase of softening prices as seasonal demand is slowing, stock levels are growing and cheaper imported material is available. In September, bottle-grade PET resin prices were mostly rolled over from August kevels as feedstock pressure subsided. The paraxylene (PX) contract price for September remained unchanged at €760/tonne, while MEG was €55/tonne higher. The impact on PET costs of these feedstock cost increases is estimated at around €15/tonne.
The peak of the beverage bottle producing season has now passed and demand will naturally weaken over the autumn and winter months. Producer stocks swelled in September as a result of disappointing sales and sellers will be seeking to offload as much of this material as possible in October. Suppliers will also be considering a reduction in production rates to balance stock levels with expected lower sales.
Reports in Spain suggest that the PET producer La Seda de Barcelona) may restart its mothballed site at San Roque during September.
Provided there are no unexpected upward movements in feedstock costs, PET notations may well dip this month.