European L/LDPE producers targeted margin improvement last month following a €35/tonne rise in the February ethylene contract price. They pointed to declining imports, a strong Asian market and the upcoming European cracker maintenance period to support their calls for further price increases.
Producers did indeed manage to extend profit margins during February. LLDPE prices increased by €60/tonne with LDPE prices up by around €50/tonne. LDPE was a little more balanced than LLDPE. There was still an ample supply of imported LDPE material available, whereas LLDPE imports from the Middle East have dwindled in recent months.
There was sufficient material to meet demand, but producers' stocks were generally on a declining trend. Producers started to build up buffer stocks ahead of the expected cracker maintenance season.
Demand was livelier during the month, despite rising price levels.
In February, HDPE producers called for price increases of €70/tonne in a bid to broaden their profit margin. The proposed price hike was well ahead of the €35/tonne rise in the monthly ethylene contract price. Stronger demand and more limited availability led to HDPE prices rising on a broad front. Blow moulding, injection moulding and blown film grades each registered gains of €50-60/tonne.
Material availability was slightly more restricted through February due to a declining volume of imports and producers building up stocks ahead of the refinery maintenance season. Injection moulding material reportedly saw better availability than blown film and blow moulding.
Demand rallied during February, despite the rising price levels, due largely to lively business in the end markets. Consequently, stock levels at converters diminished faster than expected, which piled on pressure to buy.
In February, the European propylene contract price settled €45/tonne higher on the back of sharply rising North American propylene costs and the upcoming cracker maintenance season beginning in March. European polypropylene producers consequently targeted price hikes in excess of the propylene cost rise to capitalise on the developing supply shortage.
Homopolymer grades saw price increases amounting to €50/tonne with the tighter copolymer grades registering gains of €55/tonne.
While there was generally sufficient material available to meet demand, supply started to dwindle during the month as producers built up stocks ahead of the forthcoming cracker maintenance season. There was also less imported material around due to plant outages in the Middle East.
Demand recovered in February after a slow start to the year. End markets were livelier and converters built stocks ahead of impending supply shortages.
In February, the styrene monomer reference price registered another hefty increase, up by €260/tonne. The benzene contract price also saw another sharp rise, gaining €177/tonne in February on very tight market fundamentals. Maintenance outages at plants in Asia and North America have thinned out worldwide supplies, along with expected bottlenecks in Europe due to impending cracker plant maintenance turnarounds.
Producers insisted on passing through the €260/tonne cost rise in full, making GPPS more expensive than it has ever been. The €90/tonne premium for high-impact polystyrene is coming under scrutiny following a €460/tonne rise in butadiene costs.
The very high prices led to lower than expected demand for polystyrene in February. However, due to further anticipated price increases some converters bought more than they needed last month.
Producers have adjusted output to match the lower demand.
In February, PVC producers were determined to improve their margins after prices merely tracked the proportionate rise in ethylene costs in January. Most producers announced a planned price increase of €40/tonne last month following the €35/tonne rise in the ethylene contract price. This equates to a €17.5/tonne rise in the PVC cost base.
PVC producers managed to push through price increases, but smaller than they wanted. PVC compound prices increased between €25-30/tonne. Plasticiser costs continue to rise as a result of the shortages in the C4 olefin chain, thus pushing up S-PVC (P) compounds. Also, titanium dioxide, the whitening agent used in PVC compounds, is continuing its upward price trend.
European PVC demand was at normal low levels for the time of year. There were however good export opportunities to Turkey and the Far East.
In February, buyers of PET bottle-grade resin once again faced steep price rises following an increase of around €90/tonne in the previous month. The continued upward price trend reflects further increases in the PET cost base.
The European paraxylene and monoethylene glycol (MEG) contract prices for February settled €50/tonne and €119/tonne higher, respectively, compared with the January level. The cost increase is due to the limited supply of material to the market and increased feedstock prices. As a result, the PET cost mix increased by around €70/tonne last month.
PET producers once again attempted to raise prices by more than the increase in costs to improve profit margins. However, plentiful supply and low off-season demand meant that prices increased in line with costs. A relative lack of imported Asian material supported producers' upward price push.