Producers backtrack on price hike plans
Buyers of standard thermoplastics forced producers to backtrack on initial plans to boost their profit margins by raising prices in September.
Margin gain for PS
Calls from PS producers for a price increase of €30/tonne soon disintegrated when the average of the three September styrene monomer contracts were settled down €39/tonne. As PS producers' profit margins had been eroded during Q3, they attempted initially to limit price settlements to a rollover basis. However, greater pricing flexibility emerged as the month progressed and settlements slipped by €15-20/tonne compared with the previous month.
Producer stock levels had started to grow, with demand weaker than would be expected. However, several maintenance turnarounds were in progress during September through to October, including Total and Styron at their respective SM plants in France and the Netherlands.
In September, PP producers consolidated the margin gains already achieved during Q3 by holding PP price rebates to below the €37/tonne reduction in the monthly propylene contract price. By the end of the second week notations were down by €25/tonne compared with August.
Demand was weaker than normal as a result of the worsening economic situation in Europe. Many converters did not replenish their inventories as much as expected due to dwindling end user order intake. Some were also holding back from buying additional volumes in the belief that prices would fall further.
Supply was better balanced as operating rates had been reduced and some plants were undergoing maintenance.
L/LDPE settles on a rollover
L/LDPE producers soon abandoned plans to raise prices by €50/tonne last month as end use demand slowed due to growing economic uncertainty. Producers wanted higher prices, despite a drop of €5/tonne in the monthly ethylene contract price, because profitability had deteriorated during the third quarter. However, most contracts were being settled, at best, on the basis of a price rollover by mid-month.
End user demand was weak and converters were running on lower inventories. Industrial demand was weakest whereas demand for hygiene, medical and food packaging markets were more stable.
A number of producers, including Dow's LDPE line at Terneuzen and Ineos' LLDPE lines at Cologne and Grangemouth, were both undergoing maintenance work in September and others were looking to reduce operating rates to manage inventories.
Producers were also exploring export options in dollar-denominated economies to take advantage of a falling euro.
Subdued sales restrain HDPE
HDPE producers tabled price increases ranging between €30-50/tonne for September contracts, despite a €5/tonne reduction in the monthly ethylene contract price, claiming a need to improve unsatisfactory profit margins. However, a combination of lacklustre demand and adequate supply soon put the brakes on the planned upward price development. By mid-month HDPE contracts were being largely settled on the basis of a rollover.
Blown film demand was generally weaker than blow moulding and injection moulding due mainly to stable ordering for consumer packaging markets.
Material availability was balanced with the subdued level of demand. Unipetrol's HDPE line in the Czech Republic and the Ineos' HDPE plant in Scotland were both down for routine maintenance in September.
PET higher despite slowdown
European bottle-grade PET resin prices continue to be driven by volatile feedstock costs. In September, contract prices for the two principal raw materials for PET production, paraxylene, - which is used to produce purified terephthalic acid (PTA) - and monoethylene glycol (MEG), both settled at a higher level, which resulted in a €60/tonne rise in the PET cost base.
PET producers initially asked for price increases of €100/tonne, citing a need to improve profit margins. However, weaker end user demand meant that price increases in line with cost development was the best they could achieve.
Demand was much lower than expected, even for a period towards the end of the bottle-making season. The worsening economic climate and the poor summer weather conditions in Europe were main factors. As a result, stocks of bottled drinks at end users were much higher than usual, which in turn led to lower orders for preforms and bottles from converters.
While most PET plants continued to operate, producers reduced operating rates even further to prevent excess inventories.
For October, PET feedstock is expected to rise at an even steeper rate.
PVC sales disappoint
PVC producers announced a planned price increase of €30/tonne last month to bolster flagging margins although the September ethylene contract price dropped by €5/tonne.
They pinned their hopes on a recovery in demand after the summer holiday season had come to an end. Their hopes were however soon dashed with sales failing to pick up as expected. It appeared the best they could achieve was a price rollover for September.
Demand from pipes and profile and cable converters were well below expectations. Orders from central European converters, which had been one of the few bright spots for PVC sellers, were disappointing. However, the depreciation of the euro against the US dollar has opened the possibility of higher export business.
With most plants operating without disruption and demand low, producers' stocks have increased over the last two months. Vinnolit was however due to commence maintenance at its German PVC plants from 20 September.