Price slide grows in pace

A combination of lengthening stocks, subdued demand and rising import volumes have conspired to put significant downward pressure on prices in June

PS hit by margin loss

General purpose polystyrene prices tumbled by €80-90/tonne last month after a drop of €75/tonne in the monthly styrene monomer contract price. Producers were unable to hold onto any of the cost reduction to improve their profit margins in the face of higher inventories and subdued demand.

High impact grades fell by slightly less than GPPS with producers being less willing to grant the same price reductions due to the continuing rise in the cost of butadiene. They are targeting a price differential of €150/tonne between HIPS and GPPS this month to reflect movements in the cost structure.

PS demand is dropping with converters reluctant to restock until prices come down further.

PP weakens

PP sellers had to bow to growing price pressure from cheaper imported material and slower demand by reducing prices by much more than they wanted last month. Contract business notations dropped by €50-60/tonne on average compared with the €40/tonne fall in the June propylene contract price. In southern Europe, where business was even slower, prices tumbled by as much as €70/tonne.

Homopolymers were in good supply and boosted by imports. Producers varied in their ability to supply copolymer grades.

Most converters only bought what they needed to meet their short term production needs as they expected prices to fall further in July when the market normally sees lower seasonal demand.

L/LDPE buyers win major concessions

As June began, producers of L/LDPE were hopeful that they could restrict price decreases to below the €45/tonne fall in the ethylene contract price. It soon became apparent however that they would be forced to make major price concessions. Inventories were lengthening, demand was subdued and a growing volume of competitively-priced imported material from the Middle East was available. As a result, L/LDPE prices fell by up to €90/tonne for the month as a whole. Converters were making the most of the cut-price deals available through traders and distributors and only buying just enough contract material from producers as they needed to meet their immediate production needs. Producers on the other hand offloaded as much stock as they could, fearing that prices would fall even further this month. Reports of production cutbacks at cracker and polymer plants and bringing forward maintenance programmes to curb supply were widespread.

HDPE faces growing import pressure

Like their L/LDPE counterparts, HDPE producers were determined to limit the drop in prices to below the fall in ethylene costs last month, not least because of the very slim margins on this polymer. Initially they were successful, but import pressure grew as the month progressed and producers were reluctantly persuaded to offer higher discounts to contract buyers. Contract prices settled on average at just above the €45/tonne fall in ethylene costs during the month of June.

Blown film and injection moulding material was in good supply but blow moulding grades were somewhat shorter.

Demand was rather more subdued than normal as converters speculated that prices would soon fall further.

Production cutbacks are likely as producers try to limit any further price reductions in July.

Triple-digit decline for PET

PET producers hoped to restrict the drop in bottle-grade PET prices as close as possible to the €30/tonne impact of raw material cost reduction on PET production costs last month. However, prices once again faced strong downward pressure due to a combination of lower feedstock costs, higher imports and lengthening supply. June PET contracts were being settled with decreases of up to €100/tonne compared with end May closing prices.

Material availability was good with most plants operating at normal rates following the series of production outages that had shortened supply earlier in the year. Asian imports also swelled supply and put further downward pressure on spot notations. In addition, the production issues that had previously shortened PTA output were resolved.

PET demand held up reasonably well due to the good weather in June and is reported to be similar to levels at the same time last year.

PET feedstock monoethylene glycol (MEG) is expected to settle higher in July with seasonal demand growing for its use in anti-freeze. PET demand should remain healthy and supply is expected to tighten.

PVC drifts downward

PVC producers attempted to improve their hard-pressed margins by holding the planned price reduction to around half of the €45/tonne drop in ethylene costs last month. But buyers were not impressed however and held out for more significant price concessions.

While some small-to medium-size orders were settled down €20/tonne against May closing levels, major pipe and profile buyers also managed to force prices downward. In southern Europe where building activity is being hit by government austerity measures, PVC prices fell between €10-15/tonne. For northern Europe, prices moved between a rollover and a drop of €5/tonne.

Producer stocks are still low after a series of plant outages, but are sufficient to meet the low level of demand.

Arkema restarted its VCM facility at Lavera, France, at the end of May. The force majeure declared at the end of April for PVC supplies from all the company's French sites was lifted at the beginning of June.