The price of standard thermoplastics rose again in March, driven by cracker outages and a surge in demand for heating.
Feedstock shortages and steady demand buoyed L/LDPE prices last month. Converters were left reeling as PE producers laid down price increases of up to €150/tonne following a rise of €86/tonne in the March ethylene contract price. They were determined to capitalise on the tightening supply situation to make sizeable margin gains.
While most contracts were settled at rates well above the rise in feedstock costs, some freely negotiated deals were reportedly being settled at €150/tonne over February levels.
The freezing cold February weather caused major supply disruptions at several cracker plants including Shell at Moerdijk, the Netherlands, and Ineos at Cologne, Germany. As a result, ethylene became significantly tighter and producers were forced to trim their PE production. Both Ineos and LyondellBasell declared force majeure for LDPE at their respective German plants at Cologne and Wesseling.
The force majeure on HDPE at Total Petrochemical's plant at Gonfreville, France, called on 1 March added to the already tight supply position in the sector. Producers had already reduced HDPE output because of poor margins.
HDPE producers called for a price rise of €150/tonne last month in response to the €86/tonne increase in ethylene costs, plus a large extra slice for margin improvement. While demand was naturally curtailed somewhat with prices at these high levels, those converters who needed material were forced to pay prices of over €120/tonne more than they were paying in the previous month.
While there is some evidence that some swing plants may be shifting their production from LLDPE to HDPE, material availability is likely to remain short for some time yet and further price increases seem inevitable this month.
PP suppliers responded to the €90/tonne rise in the March propylene contract price by announcing price increases of €140/tonne in a bid to improve profitability. Despite relatively subdued sales, PP prices on average were being settled €110/tonne higher than the February close with some customers who were paying relatively lower prices in the previous month facing a rise of €140/tonne.
While demand overall was reasonable some converters trimmed back order intake as their customers curtailed demand for finished product in view of the high polymer prices.
An already tight supply situation for propylene in Europe was exacerbated by force majeure being called by Ineos for propylene after one of its crackers at Cologne, Germany, had to be taken off line in late February. Several other producers, including Total Petrochemicals, also had production issues last month.
The PS market had fully expected another significant rise in the cost of styrene last month, so it came as a surprise when the March styrene monomer cost settled on a rollover basis. PS producers responded by announcing price increases for general-purpose PS grades of between €20-40/tonne. For the high-impact PS grades they asked for a sizeable premium of €150/tonne over GPPS, given the surge of €250/tonne in the March butadiene contract price.
Despite producer efforts to improve margins, GPPS prices hardly moved at all last month due to subdued demand and lengthening supply. HIPS prices crept up by little more than €10/tonne.
In view of such high prices converters are only ordering what they absolutely need to meet current demand. In response to a build-up in their inventories, producers are cutting back on output.
PVC producers faced with higher ethylene and energy costs called for a price increase of €90/tonne in March. This represents more than double the impact of higher March ethylene costs on PVC production. Producers cite an urgent need to restore their under pressure profit margins to an acceptable level.
Producers' price initiatives met with some initial success with early settlements moving upward by €70/tonne.
Material availability tightened and inventories were low due to feedstock plant outages and technical issues at several polymer plants. A number of producers were sold out early. Furthermore, the force majeure for C2 at Shell's cracker in the Netherlands didn't help matters.
PVC demand was reasonable for the time of year but producers are pinning their hopes on a seasonal upturn this month as the building season gets into full swing.
PET sellers failed to meet their price target during early March trading as a result of weak order intake. Producers asked for a price rise of €40/tonne to cover the rise in feedstock costs plus some scope for margin improvement. By mid-month, producers were prepared to settle for price gains of between €10-20/tonne.
The March paraxylene contract price settled €36/tonne above the level of the previous month while the MEG contract was expected to close €25/tonne higher. The impact on the PET cost base of the combined feedstock cost increases was estimated at around €30/tonne.
Last month PET resin demand was dampened by a significant amount of pre-buying that had taken place during the first two months of the year. Producers were however confident that demand would liven up ahead of the main bottle-producing season.