Producers pushed for higher prices in Q2 to cover previous cost hikes. Polycarbonates rose sharply supported by firm phenol and benzene costs. PA66 and PBT also registered strong gains. POM and PMMA prices had modest rises. PA66 and ABS down as feedstock tumbles.
ABS producers continued to pass higher costs through to their customers as the second quarter began. However, the situation changed dramatically in June as key ABS feedstock costs started to move in the opposite direction. The June ACN contract price dropped €120/tonne, butadiene was down by €400/tonne while styrene monomer rolled over.
Sellers attempted to retain as much of the cost reduction as they could to improve margins, but due to weak demand they were eventually forced to offer price discounts for natural grades of up to €100/tonne. Black/white grade discounts were limited to around €50/tonne.
ABS demand was significantly lower during the second quarter than in the first three months of the year. Even ABS suppliers to automotive industry firms reported a drop in orders.
Material availability lengthened in April as Styron completed maintenance work at three ABS lines at Terneuzen, the Netherlands. However, as demand dwindled suppliers began to cut back production rates in order to reduce industry stocks which had begun to rise steadily. Small volumes of Asian imports were also noted entering the European market.
Polycarbonate producers called for price increases of up to €300/tonne at the start of the second quarter following sharp rises in feedstock costs such as phenol and benzene during the first three months of the year. PC feedstock costs remained volatile through the second quarter with benzene and phenol surprisingly rising in June to buck the general trend in petrochemical markets. Producers continued to seek price hikes and managed average gains of around €100/tonne during the second quarter as a whole.
Order intake was reportedly below the levels that would normally be expected at the time of year, particularly from southern Europe. Demand from the automotive and electrical and electronics (E&E) sectors held up better than others.
Material availability tended towards long despite one major supplier carrying out scheduled maintenance. In addition, maintenance work at Ineos' large phenol facility in Gladbeck, Germany from mid-April impacted production of some PC supplies.
Producers meanwhile have reduced their plant operating rates in line with the lower demand. There were no reports that imports had been a significant factor in Europe during the second quarter at all.
PA6 producers pushed hard for price increases in Q2 to recover the sharp cost rises incurred earlier in the year. Overall, they managed gains of just over a half of the targeted €200/tonne price increases for direct quarterly contract business during the three-month period. Their price target was somewhat undermined by a triple-digit reduction in the cost of caprolactam during the April-June period.
PA66 prices, on the other hand, softened by €20-30/tonne during the second quarter, despite producers' continued efforts to claw back some of the cost increases incurred over the previous six-month period.
Order intake was much quieter during the second quarter compared to the first three months of the year as a result of the weakening European economy and the number of bank holidays. Demand from automotive OEM suppliers, which had been quite lively during Q1, was below expectations while sales to the E&E suppliers were relatively stable.
Supply improved with most production plants operating without any interruption. With demands slowing, industry stocks have started to swell and producers responded by offloading material at discounted prices.
PBT prices did not generally keep pace with the upward spiral in raw material costs that occurred during the latter half of 2011 and first quarter this year and as a result, producers' margins have been under mounting cost pressure. In response, PBT producers slapped planned price hikes of up to €150/tonne on the table at the beginning of April. By end June, long-running direct contract business had seen price increases of around €100/tonne.
Producers' plans to raise prices even further during Q3 may be thwarted by the drop in paraxylene costs in June and the relative stability in butanediol costs. The cost of the alternatively used feedstock, DMT, has now remained almost unchanged during the first two quarters.
Demand was much quieter than expected during the second quarter as converters reported dwindling orders. Rather than buy additional material, converters tended to work down existing stocks. However orders for automotive parts were reported to be more stable than other industry sectors.
PBT supply is being kept under close control by producers so as to avoid any excessive build-up of stocks.
The market leader called for a POM price increase of €200/tonne at the beginning of Q2 citing higher energy and methanol costs and restricted availability as a result of production cutbacks. While other players did not officially announce similar price increases they nevertheless followed in the leader's wake.
A combination of weak demand and good availability meant that in practice natural
grade POM prices gained only around €40/tonne during the second quarter as a whole.
Business was subdued during Q2 mainly as a result of the weakening European economy but also due to the number of national holidays. Orders from converters supplying the automotive sector were steady but most other sectors registered lower volumes.
European POM producers had no trouble in meeting demand with most plants operating without interruption. Homopolymer was more widely available than copolymer with imported Asian material adding to supply.
Copolymer production will be boosted by the ramp-up of Ticona's new POM plant at Frankfurt in July 2012. The new plant's commissioning had been plagued by a series of minor technical issues, which had resulted in delayed deliveries.
Converters resisted PMMA producers' attempts to hike prices in April after the MMA contract price had risen by €100/tonne. However once the market leader had announced a price increase of €150/tonne with 'immediate effect' in May prices started to move upwards. The company justified the price announcement by a combined €115/tonne increase in MMA costs in April and May. By end Q2 producers had managed to push through gains of close to €40/tonne.
Unlike most other engineering polymers, demand for PMMA remained at normal levels throughout the second quarter. The automotive and lighting sectors saw particularly lively ordering activity. It seems that the prospect of the market leader announcing a price rise could have sparked early buying.
There was generally sufficient material to meet demand and most European production plants were operating at full capacity.
While MMA feedstock prices have dipped there is a likelihood that PMMA prices will continue on a rising trend in Q3. Producers argue that PMMA prices have not fully reflected the rise in their cost base for some considerable time and further increases are justified.