Polyethylene market turns bearish on lack of buying

In February, European standard thermoplastic prices continued their upward trend following a further increase in oil, naphtha and raw material costs, and shortening supply across most product sectors. Polymer producers responded by calling for sizeable price increases to widen their profit margins. However, the degree to which producers managed to fully recover the feedstock costs increases varied widely across the different material classes.

Polystyrene saw the largest hikes with general-purpose polystyrene prices surging €115/tonne after the styrene monomer reference price settled €130/tonne higher. Polypropylene prices registered gains around €12/tonne higher than the €28/tonne rise in propylene costs in a tightening market. PVC producers also achieved much needed margin improvement with prices rising €15-20/tonne compared with a €10/tonne ethylene induced rise in the cost base.

Polyethylene prices moved far less than the €20/tonne rise in ethylene costs as the market became very bearish towards the end of the month. By late February, HDPE and LDPE prices had increased on average around €10/tonne while, LLDPE prices were largely unchanged.

In a tightening PET sector, prices increases were close to the €25/tonne rise in the cost base.

Supply shortening

While material was generally available in sufficient quantities to meet demand there was a notable tightening in the supply position for most polymer classes during the month. A combination of producers running down stocks and a growing number of plant outages contrived to reduce material availability. Furthermore, imports into Europe from the Far East and Middle East were not so evident.

• A summary of the latest supply-related developments is presented below:

• Total declared force majeure on polypropylene supplies from its two plants in Feluy, Belgium and Gonfreville, France 31 January due to unspecified ‘technical problems'.

• PET resins maker Equipolymers is expected to conduct a four-week planned maintenance starting 1 March at its 160,000tonnes/year capacity plant at Schkopau in Germany.

• The Cosmar styrene plant in Louisiana, US, has extended its force majeure to mid-April.

• BASF's Ludwigshafen plant in Europe started maintenance works in February.

• After a problem with one compressor, Repsol has had to shut down its cracker at the petrochemical site in Tarragona, Spain. How long the cracker will be out of action, is not yet clear.

• Output of caustic soda at French petrochemical producer Kem One's chlor-alkali plants at Lavera and Fos-sur-Mer is back at full operational capacity after sharply reduced volumes early February.

Demand variable

Demand varied widely across the different product sectors last month. Polyethylene sales were very slow as many converters ran down stocks after strong buying towards the end of the last year. Polystyrene demand was low due to the very high prices being asked for by producers.

Polypropylene, on the other hand, saw good order intake through February due to the prospect of tighter supply and even higher prices over the coming months. The PVC profile sector saw very lively demand while other sectors were normal. After a solid start to the year, PET sales quickened in February as converters stocked up ahead of the bottle-making season.

March outlook

The polymer price outlook remains uncertain going into March. Possible shortages on the supply side as a result of imminent cracker and polymer plant maintenance turnarounds support further price increases in March. However, lower crude oil and naphtha costs could counteract any supply induced cost increases. In any case, polymer producers will likely call for further price increases in an attempt to broaden their profit margins.

For full report, click here.