Buyers stunned by prices hikes
Buyers of standard thermoplastics were faced with calls for triple-digit price hikes at the start of the New Year as petrochemical feedstock costs surged.
Triple-digit hikes for L/LDPE
Rising crude oil and naphtha prices as well as a depreciation in the euro against the US dollar caused ethylene costs to soar in January. L/LDPE producers responded to the €105/tonne rise in the monthly C2 contract price by announcing price increases of up to €150/tonne. A combination of bad weather, which curtailed some upstream production plants, and good demand meant that buyers had little option but to pay more than the monomer cost rise for L/LDPE film grades.
LDPE was structurally short in January with producers unable to build inventories because of good order intake over the holiday period. LLDPE was less tight but production hiccups in the Middle East limited import availability.
L/LDPE demand was normal in January but converters were only buying sufficient volumes to meet production needs at the time.
Ethylene costs and L/LDPE prices are widely predicted to rise again in February.
HDPE sellers seek margin gains
HDPE producers put on a united front in January in an effort to pass through the rise in feedstock costs and improve profit margins. Their initial asking price was around the €150/tonne mark over December settlements. While some lower-priced contracts were pushed even higher than this figure, on average notations were settled €120/tonne higher. This represents a small margin gain compared with the €105/tonne rise in the January ethylene contract price.
Producers' effort to raise prices was helped by tight supply and a lack of imported material due to the weakness of the euro.
Demand was good as converters who needed material had to restock at the start of the year. Blow moulding grades were boosted by particularly lively demand for winter chemical containers.
PP buyers faced savage cost increases at the beginning of the new year following a surge of €110/tonne in January propylene contract price. Converters fought hard to restrict the price hikes to less than €100/tonne but producers largely got their own way with prices increasing in line with the higher monomer cost.
Supply is extremely tight and industry stock levels low as a result of continued production issues at several cracker and polymer plants. These include continued force majeure at Total, LyondellBasell at Carrington in the UK and Sabic's copolymer production at Geleen in the Netherlands.
Demand began the year slowly but started to pick up as the month progressed.
PVC hit by higher costs
PVC costs were also impacted by the €105/tonne rise in the January ethylene contact price. Producers posted a planned price hike of €100/tonne last month to recover half of the cumulative C2 cost increases that they had been unable to pass on to customers during the three-month period to January. By mid-month, some lower-priced contracts had already been settled €60/tonne higher in Spain.
For northern Europe, where PVC prices are somewhat higher, the expectation was that prices would likely settle up by €40-50/tonne.
PVC pipe and profile demand has been curtailed by the severe winter weather late last year. There were however signs that pipe and profile demand was starting to recover last month as construction activity was able to resume as the weather improved. In contrast, demand for film and cable grades exceeded expectations.
Producers' stock levels were slightly higher in January compared with the unusually low levels towards the end of last year.
Costs push PS higher
Styrene monomer (SM) costs surged in January due to an unexpectedly massive rise in benzene (up €149/tonne) and ethylene costs. In consequence, the average of the three January SM contracts was settled €126/tonne higher against December. Producers announced planned price increases of €140/tonne but were prepared to accept price rises at just around the increase in the SM cost.
Producers were operating their plants at reduced rates in January in order to avoid a build-up in stock levels after a slackening in ordering activity towards the end of the year. Demand started slowly in early January but picked up significantly as the month progressed.
PS prices are expected to rise again this month.
PET continues upward trend
PET producers pushed through significant price increases in January in response to a continued upward cost push. Raw material prices rose again last month largely as a result of strong Asian demand for polyester fibre and PTA tightness. BP declared force majeure for the direct PET feedstock PTA at Geel in The Netherlands in December, which restricted supply to non-integrated PET players. The European paraxylene contract price rose by €90/tone with the MEG contract price up by €60/tonne.
PET producers responded by asking for price increases of up to €100/tonne but settled for gains of between €80-90/tonne. This still represented a small margin improvement for producers, taking into account the impact of the feedstock price rises.
Producers are operating their plants at full capacity to meet demand because of a virtual absence of any imported material. Availability is still tight at one of the lowest demand periods of the year. Some converters were holding back from making additional purchases in January because of the high price levels. Market insiders are however predicting further feedstock and PET price increases in February and March.