Buyers of standard thermoplastics strongly resisted attempts by producers to hike prices in January, although prices for most materials rose slightly.
L/LDPE producers called for price increases ranging between €100-160/tonne in January to compensate for margin erosion during Q4 last year. This was despite the January ethylene contract price being rolled over at €1,275/tonne. Such ambitious price calls were met with firm resistance by converters and early settlements were made up €40-50/tonne compared with closing December levels.
Demand was slow to pick up following the return from holiday but recovered by mid-January. However sales were not as good as expected with converters ordering only the bare minimum with prices at these high levels. Supply was well balanced with the low levels of demand as a result of previous reductions in output.
Producers are hoping that the tighter supply position coupled with an upturn in demand will enable them to stretch their margins over the first quarter.
HDPE producers tabled planned price hikes of between €100-160/tonne for January in an effort to bolster their under pressure margins. Not surprisingly, converters were unimpressed and held out for price increases well below what producers were asking for. By mid-month blow moulding grades were being settled €20-30/tonne higher than December closing levels, with blown film and injection moulding material rising by €40/tonne.
Supply was well balanced after producers had adjusted their production in line with the lower levels of demand.
HDPE demand was slow to take off during the first half of January. Many converters had stocked up before the holiday period to take advantage of end-of-year bonuses and were only ordering the minimum volume when absolutely necessary. Producers were, however, confident that HDPE demand would recover over the next month or so.
PP sellers asked customers for price increases of up to €80/tonne in January despite a reduction of €13/tonne in the propylene contract price. Producers maintained that price increases were necessary to make up for losses incurred during the course of Q4 2012. In practice, producers were more willing to negotiate with buyers. Notations were rising by around €30/tonne for homopolymers and between €30-40/tonne for copolymers during the first half of the month.
Copolymers were in shorter supply than homopolymers but overall supply was more than adequate to meet demand. There were reports that Ineos had shut its cracker at Lavera, France, following a fire on 22 December, but the company did not confirm that PP supply from the site had been restricted.
Demand was lively as converters restocked at the start of the New Year.
With the styrene monomer contract price climbing by €60/tonne in January PS sellers responded by announcing planed price hikes of up to €110/tonne in a bid to improve their under-pressure margins. General purpose PS prices were showing gains of only €50/tonne by mid-month, far less than producers wanted. Producers were prepared to sell high impact grades at rises at less than GPPS given the continued slide in butadiene costs.
Demand was slow to take off after the holidays with many converters having bought sufficient material before the break and with prices at these high levels were in no hurry to rebuild stocks. Producer stocks were not excessive as they had carefully controlled production in recent months.
Producers remain adamant that PS prices should rise at least in line with costs over the next few months.
PVC sellers called for price increases ranging between €15/tonne and €50/tonne in January citing a need to improve margins even though ethylene costs had remained firm. Very few large contracts at the bottom end of the price range had been negotiated during the first half of the month but notations for smaller contracts at the top end of the range saw increases averaging €10/tonne.
Demand was low but in line with expectations for a low season month. Material availability is well balanced with the low levels of demand despite supply disruptions in January. North American PVC producer Mexichem, which exports to Europe, saw a loss of production as a result of a VCM outage at their main supplier PHH Monomer. The outage at the Ineos cracker at Lavera, France also restricted VCM production of Kem One.
The January European paraxylene contract price was fully settled €40/tonne higher than the December price, while MEG was initially settled up €20/tonne. The increases in the feedstock contract prices indicate an increase in PET raw material costs of €30/tonne. Having achieved a small price increase in December when feedstock costs were down, PET producers were pushing even harder for price increases last month. Their chances of success were being assisted by a reduction in imported products as the price of Asian material rises.
Producers were calling for PET price increases of €50/tonne claiming that they are still in the red and that their current margin position is unsustainable. By mid-month PET prices were settling on average €40/tonne higher than the December closing level. The lack of import competition put producers in a strong bargaining position.