Polycarbonate, ABS, polyamide, POM and PMMA prices declined during the fourth quarter as feedstock costs tumble. Only PBT prices remained firm. Demand weakened towards end of year. Material availability improved despite production cutbacks
ABS prices headed downward in Q4 as a result of lower feedstock costs, weaker demand and good availability. Acrylonitrile (ACN), butadiene and styrene monomer costs all eased during each of the final three months of last year, putting ABS producers under pressure to offer price concessions to converters. Natural grade material saw the biggest price reductions while specialty grades were firmer at the top end of the price scale due to higher costs of additives such as titanium dioxide.
Supply was generally well balanced with the slack levels of demand, with local supply bolstered by good availability of imported natural grade material. The availability of specialty grades was rather more limited due to a shortage of additives.
Styrolution declared force majeure (FM) at its Ludwigshafen ABS/SAN plant on 24 October as a result of a fire. The FM restricted output of certain speciality grades but overall the production shortfall did not have a significant effect on supply.
Demand remained weak throughout the final quarter despite the lower prices. Converters were only buying sufficient volumes to meet their current production requirements.
Polycarbonate prices saw triple-digit declines during the final three months of 2011 after feedstock costs tumbled. Benzene and phenol costs fell in October and November before recovering slightly in December while the cost of bisphenol A (BPA), on the other hand, dropped sharply throughout Q4. Transparent PC grade prices had plunged by €100/tonne by year end with the more specialised grades down only €50/tonne.
Transparent grade availability was generally quite good throughout the final quarter whereas supply of glass-reinforced and other specialty grades was somewhat tighter. With demand weak, most PC producers were operating at reduced rates during Q4 to stop excess stocks from developing.
Converters became increasingly cautious about buying additional material due to growing economic uncertainty. Most were running down stock levels before the end of year and only buying when absolutely necessary or when special offers became available. Automotive and medical were the liveliest end-use sectors.
PC producers are expected to seek price increases in Q1 following a €192/tonne rise in the January benzene contract price, which will lead to upward cost pressure on phenol and BPA.
The feedstock from which polyamide compounds are produced fell sharply during the final quarter of the year. Caprolactam, the base material for PA6, saw costs falling by close to €300/tonne in Q4, while adipic acid, the key PA66 feedstock, was down by around €270/tonne during the same period.
PA producers had no option but to pass on these cost reductions to customers. PA6 notations fell by around €100/tonne with PA66 prices slipping by €50/tonne during the quarter.
PA demand was down sharply during the final three months of last year compared with the first six months due to growing economic uncertainty. Both producers and converters had to cut output and stocks in line with the lower order intake. Even PA sales to suppliers of the automotive sector, which had been robust earlier in the year, stalled.
The downward price drift could be coming to an end this quarter as key petrochemical feedstock costs increased in January. PA producers are likely to seek price rises during the next round of price negotiations to compensate for the increase in their cost base.
Following a prolonged period of rising prices, PBT notations were largely unchanged during the final quarter of 2011. The key feedstock costs of butanediol (BDO) showed only a very small quarterly rise, while DMT, which is sometimes used instead of BDO, saw a sharp reduction in December. PBT producers were mostly content to hold prices during the quarter and accept the small margin gains brought about by easing in the cost position.
Demand softened quite markedly towards the end of the year as converters ran down their stocks prior to the holiday period. Producers, who had previously been running their plants at a brisk pace, reduced operating rates in response to slower order intake. There was also a shrinking pool of imported material available due to the weakness of the euro against the US dollar.
While converters may well ask for lower prices this quarter, PBT producers are likely to hold out for a firm rollover. Feedstock costs are once again hitting an upward trend, demand is expected to be livelier and supply is now in better balance.
POM producers had earlier achieved their target to bring customers on lower-price contracts back into line and no further price announcements were made in Q4, despite rising energy prices.
However, POM notations came under growing pressure in early Q4 as producers offloaded surplus natural grade material at much lower prices. The longish supply situation at local producers was exacerbated by growing volumes of imported natural grade material from Asia. However, the downward price trend stalled somewhat in December as producers geared up for annual contract negotiations.
Demand weakened considerably towards the year-end because of the deteriorating economic situation. Converters attempted to minimise stock levels and were only buying sufficient volumes to meet their current needs. Producers responded by cutting back output.
POM producers hope to maintain Q4 price levels during price negotiations in the first part of Q1 despite buyer calls for lower prices. They will most likely continue to curb plant operating rates in order to keep a lid on supply. There is also a good possibility that demand could rebound as converters restock after the holiday period.
PMMA producers tried to pocket some of the €105/tonne reduction in Q4 MMA costs to improve their margins. They argued that such a stance was justified since they had not fully passed on the cost increases incurred earlier in the year. However, converters pushed hard for price concessions and PMMA prices fell during Q4 as a whole in line with the reduction in MMA costs. Converters' negotiating position was assisted by significantly lower prices for imported material.
Declining demand for Asian monitor material and the start-up of new Asian PMMA production lines led to a fall in export opportunities. The automotive sector continued to be the main buyer of European PMMA extrusion material.
Material availability tended to lengthen as Q4 progressed and producers had to trim output.
While PMMA costs fell during Q4 the cost base remains at historically high levels. Producers are therefore unlikely to concede much more on price for a while yet, especially as demand is predicted to pick up. The most likely scenario for Q1 is either a slight further softening of prices or a rollover.