Buyers resist planned hikes

Converters strongly resisted plans by polymer producers to pass on the rise in petrochemical feedstock costs last month.

L/LDPE prices come under pressure

L/LDPE producers initially called for a minimum price increase of €25/tonne to recoup the rise in May ethylene costs. It soon became clear however that buyers would have none of it, especially after crude oil prices fell by close to 10% in early May.

Processors refrained from buying additional material in the hope that PE prices would come down soon. Most LDPE contracts were settled on a roll over basis with LLDPE prices under growing pressure from Middle Eastern imports.

The supply situation is much better for L/LDPE with no major polymer plant outages. Producer stocks are lengthening as buyers wait for lower prices. While underlying demand remains good, converters have sufficient stocks to play a waiting game.

L/LDPE prices were expected to come under more pressure in late May as it seemed likely that the June ethylene contract price may be settled at a lower level.

HDPE undershoots target rise

HDPE producers asked for price increases ranging €40-50/tonne last month to cover the €25/tonne rise in the monthly ethylene contract price and make what they said was a much-needed contribution to their under pressure margins. These plans soon had to be revised due to strong customer resistance and better material availability. HDPE prices edged only €10-15/tonne higher during the first two weeks of May.

Converters were playing a waiting game after crude oil prices fell in early May and only buying sufficient material to meet their immediate production needs.

At the same time, supply for blown film and injection moulding grades lengthened while blow moulding was relatively short. In addition, higher volumes of imported injection moulding material flowed into Europe with more expected over the next two months.

PP edges up

Producers initially called for price increases of at least €35/tonne to cover the increase in the May propylene contract price. Buyers were however unimpressed and stubbornly resisted, especially after crude oil prices tumbled in early May. They were reluctant to commit to additional volumes in the expectation that prices would come down in June.

Furthermore, producers were not being too hard on price as they wanted to shift volumes. Overall, PP notations edged €10-15/tonne higher last month.

There were no major availability issues with most PP plants running as normal. Copolymer supply was well balanced while availability of homopolymers was improving, partly due to growing volumes of imported material.

Better gains for PVC

PVC producers initially announced planned price increases between €50-75/tonne from 1 May to recoup the rise in ethylene costs and make a contribution to their under pressure margins. It soon became clear however that such a large rise was unrealistic and they were forced to reduce their offer to more appropriate levels.

By mid-May early contracts in Spain and Italy were being settled at levels of between €25 and €30/tonne higher than the previous month.

PVC is well balanced with just sufficient material available to meet a gradual recovery in order intake.

The sector is still being affected by production issues. Arkema declared force majeure on PVC output at Lavera, France in early May, while force majeure has been in place at Vestolit for some time. Ineos ChlorVinyls started its five-year maintenance turnaround at its VCM plant in Wilhelmshaven, Germany last month. SolVin also had maintenance turnarounds at its French plants but the situation is improving.

PS takes margin hit

PS suppliers sought increases ranging €40-50/tonne in May to compensate for the rise of €35/tonne in the monthly styrene monomer cost. They also wanted a higher price premium of €120/tonne on high-impact grades after the May butadiene contract price soared by €360/tonne.

Producers were, however, soon forced to backtrack on their plans as a result of lengthening supply and lower demand. GPPS notations climbed €15-20/tonne during the first two weeks of May.

Much improved margins in recent times persuaded producers to ramp up production levels and stocks are now higher. Demand was rather lacklustre as converters preferred to hold back after the sharp fall in crude oil prices in early May.

PET tumbles in line with costs

European PET notations fell sharply last month as feedstock costs tumbled and supply improved. In May, bottle-grade PET resin was trading between €80-100/tonne lower than in the previous month.

The paraxylene monthly contract price settled €100/tonne lower at €1,250/tonne as the Asian polyester fibres boom appeared to be drawing to an end. MEG was down by €66/tonne while PTA became more freely available following the severe supply constraints seen during Q1. This meant an overall reduction of €80/tonne in the PET cost base.

Material availability is much improved and most local PET producers are operating their plants at full capacity. Demand is very lively as this is the peak of the bottle-making season.

Imported material from the Far East is also being attracted into Europe as a result of lower Asian prices and the weak US dollar. With prices starting to fall, sellers are off-loading surplus stock all along the supply chain.

There is however much uncertainty about which direction PET prices will move over coming months. Much will depend on feedstock cost development and the volume of imported material from Asia.