Polymer prices fell last month as demand was below the level normally expected for the beginning of springtime
One L/LDPE producer called for a €30/tonne price increase in April despite the €60/tonne reduction in the ethylene contract price. However, most other producers accepted that part of the cost reduction would have to be passed onto converters. By mid-month, L/LDPE film prices had dropped by around €20-25/tonne, which meant that producers had retained the lion's share of the cost reduction and improved their margins.
While demand was reasonable, converters continued to buy cautiously as L/LDPE prices are expected to fall again in May given the further downward trend for feedstock costs in early April. Material availability was balanced as producers controlled production levels to prevent an inventory build-up. Planned and unplanned plant outages also kept a lid on supply.
Producers will hope that demand recovery and supply restrictions will limit price concessions in May.
Initially HDPE producers adopted different price targets in April in response to the €60/tonne fall in C2 costs. One asked for a price increase of €30/tonne and others looked for a rollover or were prepared to offer small price concessions. However, they were all determined to claim back some of the margin that was given away in March when price increases failed to match the cost rise. By mid-month, blow moulding and injection moulding grade prices had slipped €25-30/tonne with blown film grades down by €20/tonne.
Building sector demand was better than in March but order activity was generally slow. Converters were only buying sufficient material for their immediate production needs with prices expected to fall again in May. An inflow of blow moulding material from the Middle East is also exerting downward price pressure.
PP producers were keen to rebuild margins last month after price increases had fallen way short of the cost rise in March. Buyers, on the other hand, wanted a price reduction in line with the €50/tonne fall in the propylene contract price. In practice, contracts were being settled about €30/tonne lower for homopolymers and €15/tonne lower for copolymers.
Food packaging sector demand was in line with expectations while demand from other sectors was described as being rather patchy. Producers varied in their ability to supply, with some continuing to be affected by plant maintenance programmes and unexpected outages.
With feedstock costs sliding further in April converters are waiting for even lower PP prices this month. However, with several major crackers down for maintenance, possible supply restrictions could limit the scale of any such price concessions.
PS buyers sought significant price rebates in April after the styrene monomer contract price settled €64/tonne lower. However, after the leading supplier reduced its gross market price by €40/tonne for GPPS grades and left the HIPS premium at €115/tonne, the tone had been set. Most deals were indeed settled during the first two trading weeks of the month along these lines.
Demand dropped towards mid-month following a livelier start than expected. Converters noted the continuing reduction in feedstock costs and were prepared to wait for polymer prices to fall further in May before replenishing their inventories.
Material availability was balanced, with limited disruption to PS supply due to the planned and unplanned cracker maintenance turnarounds. Consolidation of European PS capacities continued with the closure of Total's Stalybridge plant, the last remaining British PS production site.
The €60/tonne reduction in the April ethylene contract price meant a €30/tonne decline in the PVC production cost base. Ineos ChlorVinyls, the European market leader, responded by announcing that S-PVC prices would be rolled over into April. Most other producers followed suit in an attempt to improve margins.
Converters were determined that producers should share some of the cost benefits by offering price concessions. With poor demand and good availability, contracts were being settled on average €15-20/tonne lower by mid-month.
Construction PVC demand in April was little better as the weather improved but was not as good as would normally be expected. Construction sector activity is still suffering from challenging economic circumstances and many months of cold weather. Converters were also minimising PVC purchases with prices expected to drop further over the coming months.
A large drop in the paraxylene contract price (down €130/tonne) and MEG (expected drop of €50-60/tonne) has led to downward pressure on PET prices. The combined feedstock cost development implies a fall of around €115/tonne in the PET cost base. Producers were however reluctant to pass on the full decrease in feedstock prices to consumers as they have struggled to improve margins since the autumn of last year.
By mid-month bottle-grade PET was trading €35-45/tonne lower depending on the particular negotiations.
Producers managed to improve margins in April because of the low production rates maintained so far this year, as well as a range of turnarounds. Converters remained hesitant to take advantage of cheap import prices because of uncertainty over future European prices and the long lead time for deliveries. Meanwhile, PET demand remains weak.