Following three months of sharply falling notations, European standard thermoplastic prices took a steep upward climb last month.
Following another sharp decline in July, L/LDPE prices made a spectacular about-turn last month. The August ethylene contract price settled €140/tonne higher prompting suppliers to seek price increases of €200/tonne, including an element to bolster margins. While some lower-price contracts saw increases of up to €160/tonne suppliers were unable to achieve their original price targets. By mid-month notations were settling on average a little over the monomer rise at around €145-150/tonne more than end July levels.
With prices rising sharply again and with further price increases on the cards this month, converters began refilling their inventories despite the summer holiday period. There were even reports that some producers were considering order stops on August deliveries because of unusually lively demand.
Supply will tighten this month due to maintenance at several cracker plants.
HDPE producers targeted a €200/tonne rise in prices last month after the August ethylene contract price saw a surprisingly steep rise of €140/tonne. While producers had hoped to raise prices by more than the monomer increase to improve their profit margins notations were settling at around the C2 cost increase by mid-month.
Demand for injection moulding and blow moulding product was in line with expectations but blown film demand disappointed following healthier sales in the previous month. Producers are however convinced that demand should pick up late August through September as converters start to replenish inventories after the holidays.
Material availability was well balanced with demand although there were plant maintenance issues at several suppliers which delayed deliveries. There were limited import volumes available with power problems restricting North African imports from Sidi Kerir Petrochemicals.
PP suppliers managed to limit the price decline to €130/tonne in July, thus pocketing €40/tonne of margin gain after C3 costs plummeted by €170/tonne. There was a complete turnaround in August as the monthly propylene contract price increased by €130/tonne. Suppliers responded by calling for price increases of €200/tonne to further improve margins. Early settlements saw increases of a similar magnitude to the cost component with only customers on existing low-priced contracts paying more than the monomer rise.
Demand was as expected much in line with the usual seasonal slackness but some buyers sought to rebuild stocks early in anticipation of further price rises. Order intake should rise late August and into September as converters return from vacation.
Supply is likely to tighten this month as several cracker plants will be shut down for maintenance.
PS sellers managed to retain a large slice of the cost relief obtained from the lower SM settlement in July to bolster profit margins. PS contract settlements were down €80/tonne on average compared with the €115/tonne drop in feedstock costs.
Last month the SM contract price was fixed €135/tonne higher at €1,367/tonne. One PS supplier announced a price hike in line with the monomer rise while others targeted additional margin gains. Early contracts however showed a similar rise to the SM cost increase.
PS markets are expected to tighten further this month. Buyers who were previously reluctant to pay the higher prices that were asked will soon have to refill their inventories. Supply restrictions are also starting to bite with benzene remaining short and the outage at Styrolution in Canada adding to the upward price momentum.
Most of the major PVC producers responded to the €140/tonne rise in the ethylene contract price, which pushed up their cost base by €70/tonne by calling for a margin widening price hike of €100/tonne. For the most part however, actual price increases were limited to the €70/tonne cost rise with higher prices being paid by those customers on lower price contracts.
PVC suppliers' price push was assisted by a more favourable balance between demand and supply. Demand was better than expected, particularly in northern Europe, but was as usual slower in southern parts due to holidays. Demand is expected to pick up even further as converters return to work late August and start to rebuild stocks ahead of the building season.
Material availability was good for most grades despite maintenance shutdowns at KEMOne, Ineos and Anwil.
After four months of falling prices, PET raw material costs soared last month as a result of rising demand, limited availability and tightening supply. In August, the European paraxylene contract price increased by €135/tonne while MEG grew by €90/tonne. The combined impact of these cost increases on the PET cost base is estimated at over €110/tonne.
PET sellers responded by asking for price increases in excess of the cost hikes but had to settle for increases of around €100/tonne.
PET demand was at normally low seasonal levels for August but an improvement in the weather helped to sustain sales. Some converters had pre-bought where possible in July in anticipation of strong price increases.
PET plants are continuing to operate at reduced rates because of the sluggish demand and there were limited import volumes in evidence.