Commodity prices remain under pressure
Any hopes that sellers of standard thermoplastics had originally harboured to improve their profit margins in November soon evaporated. Polymer producers were forced into making price concessions at least equal to, and in some cases, in excess of the reduced monthly feedstock contract prices.
LLDPE film grade prices were down by €40/tonne and LDPE prices slipped by €30/tonne compared with the €27/tonne reduction in C2 costs. HDPE grades also fell between €30-40/tonne. Polypropylene prices fell by €15/tonne against a €10/tonne reduction in C3 costs. PVC prices fell by €15-20/tonne while polystyrene dipped in line with cost of styrene monomer.
The supply situation is generally improving for all classes, with only a few shortages reported for certain grades. Imports are not a major influence, apart from PVC and PET, as Middle East supplies are being diverted into Asia where prices are rising.
Demand was for polyolefins and PS was livelier but PVC and PET sales were weaker, mainly due to the usual seasonal downswing.
L/LDPE sellers forced to cut prices
L/LDPE producers were initially targeting a rollover at the beginning of November to improve their profit margins as the November C2 contract price had fallen by €27/tonne. Strong buyer resistance however, forced sellers to concede price reductions. LDPE prices fell by €30/tonne at the bottom end of the price range and by €20-20/tonne at the higher end. Bottom-end C4 LLDPE grades slipped by up to €40/tonne and by €10-20/tonne at the higher end of the price range.
The European LDPE sector is well balanced with availability close to market demand following plant shutdowns and reductions in cracker and polymer plant operating rates. LLDPE availability is somewhat longer with local supply boosted by Middle East imports.
L/LDPE order intake was stronger in November compared with previous months. Suppliers were also taking advantage of emerging export opportunities to China, where prices rose sharply in November on the back of stronger demand.
HDPE buyers win concessions
Producers' hopes for a price rollover or even a small reduction last month soon came to nothing. Buyers refused to pay the prices being asked for as feedstock costs had declined by €27/tonne in November. Notations for injection moulding and blow moulding grades dropped €40/tonne with blown film grades down by €30/tonne.
The blown film sector is well balanced while there is a stronger offer for blow moulding, and particularly for injection moulding, where imports from Central Europe are more evident. There were however lower import volumes from the Middle East because Asian prices have moved much higher.
Demand was livelier than expected last month, largely due to recovering sales for industrial customers. Injection moulding sales for caps and closures is down because the beverage bottle manufacturing season has ended.
Polypropylene producers called for a rollover at the beginning of the month to improve their profit margins. Buyers resisted this strongly and forced sellers to make price concessions of between €10-20/tonne. This compares with the drop of €10/tonne for the November propylene contract price.
Demand was livelier last month as buyers had held back from making additional purchases in October in the belief that prices would fall further. Customers were also buying to hit their rebate levels for the year.
PP availability is good but feedstock supply remains tight. There are limited volumes of imported material available as Middle East supplies are being attracted to Asia where notations are rising.
PS matches cost fall
Polystyrene prices dipped €15/tonne in November despite producer calls for a rollover. Quite unusually, the styrene monomer cost fell last month (down €16/tonne) while the benzene contract price increased (up €42/tonne).
There were signs of improving PS demand last month with a pickup in the recession-hit sectors such as consumer goods, construction and automotive. The food packaging sector continues to show solid sales. Overall, sales are still well down for the year as a whole.
Meanwhile, PS producers are continuing to adjust supply to reduced demand with further announcements of plant closures. Total Petrochemicals for instance has announced that Polimeri Europa has cancelled the contract for the production of polystyrene in Feluy, Belgium.
PVC supply lengthens
PVC prices came under pressure in November with weak demand and improved material availability. Producers initially targeted a price rollover to bolster profit margins. Buyers however demanded a share of the ethylene feedstock cost reduction and suppliers were forced to concede around €15-20/tonne.
PVC demand was weak across most end use sectors last month. The building and construction sectors in particular saw the beginning of the usual seasonal lull in sales.
Supply has lengthened with the lifting of force majeure on PVC by Arkema in France. There is also a growing volume of North American and Asian imports in Southern Europe.
PVC prices are likely to face further downward pressure this month with no realistic prospect of a change to the demand-supply situation. Producers will however fight hard to restrict any possible price slippage in an effort to at least prevent further deterioration to their profit margins before the end of the year.
Buyers resist planned PET hikes
Bottle-grade PET prices moved upward in November following a hike in feedstock costs. The monthly European paraxylene (PX) contract price settled €65/tonne higher at €680/tonne driven by stronger demand and higher prices in Asia. Monoethylene glycol (MEG), the other key PET feedstock, had not yet been settled at the time of writing this report, but was also expected to move higher.
PET suppliers were initially targeting a price increase of €50/tonne last month to cover the higher feedstock costs and improve their profit margin. It soon became apparent however that such a price movement would be unacceptable to converters and notations settled €35-40/tonne higher.
The European PET market is well supplied despite capacity reductions totalling around 600,000 tonnes since the start of the year. This supply gap has however been largely filled by additional import volumes from Asia and the Middle East.
Demand was down in November as the beverage bottle-making season was at an end. Virgin PET resin sales volumes are also being restrained by growing use of recyclate because of its low price, and continued lightweighting of PET bottles.