Buyers resist planned hikes in balanced markets

In December, European standard thermoplastic prices faced upward cost pressure as a result of rising crude oil and naphtha costs. The ethylene and propylene contract prices both settled €32/tonne higher while the styrene monomer reference price surged by €95/tonne. Polymer producers subsequently announced planned price increases which were in most cases higher than the cost rise to improve their margin position.

To the disappointment of producers, polymer markets were too quiet in December to absorb much higher prices. LDPE prices remained unchanged from November while LLDPE prices fell between €5-10/tonne. HDPE blow moulding material prices also remained unchanged with small gains for blown film and a €20/tonne gain for injection moulding material.

For PP, there were small price increases for injection material while homopolymer film material prices rolled over. PVC and PET prices also barely shifted during December. Polystyrene producers, on the other hand, managed to raise notations in line with the increase in feedstock costs.

In January, European polymer markets were more bullish as converters began to restock after the holiday lull. Standard thermoplastic prices tended to closely follow the movement in raw material costs. L/LDPE producers attempted to recover some of the lost margin from the previous month by announcing planned price increase of €20-50/tonne, despite a rollover for the January ethylene contract price. However, L/LDPE prices gained just €5/tonne while HDPE and PVC prices were broadly unchanged. Polypropylene and polystyrene prices matched the respective €20/tonne and €10/tonne increases for propylene and styrene monomer.

Supply balanced

Material was available in sufficient quantities across all polymer sectors during the last two months. Most cracker plants were running at high rates and very few production issues were reported. The upcoming maintenance season is however likely to constrain monomer and polymer supply.

Only two supply restriction were announced during December with no major announcements in January.

German chlor-alkali producer, Vestolit, declared allocation on caustic soda on December 19. The allocation followed a technical failure at the company's chlorine electrolysis unit in Marl, Germany. The technical issues have also impacted VCM and EDC, with the company having to look to external supply sources.

On 12 December 2017, an explosion in a partial oxidation (POX) unit at Unipetrol's site in Litvínov, Czech Republic caused a shutdown of its POX and ammonia units. As a result, refinery activities at both Litvínov and the affiliated site in Kralupy were reduced. However, the steam cracker was quickly up and running again at full output and the prior reduction in operations ultimately had no significant impact on polymers production.

Demand brisk

In December, there was an element of pre-buying taking place across most polymer classes for fear of further sizeable price hikes at the start of the New Year.

In January, demand gradually recovered to more normal levels as converters returned to work after the holidays. However, the excess buying of the previous month dampened sales for certain polymer classes such as LLDPE, whereas PVC was surprisingly lively for the time of year.

February outlook

In February, European standard thermoplastic prices are set to rise further. Crude oil prices continued to increase during January and the monthly monomer contracts are expected to be settled at a higher level. Petrochemical feedstock supply is tightening due to production disruptions and demand is more bullish. However, the recent weakening in the dollar against the euro is expected to dampen the likely feedstock cost rises.

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