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May 04, 2018 07:00 AM

Lack of imports, low European production push PET prices up

David Platt. Plastics News Europe
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    L/LDPE

    In March, buyers achieved price cuts in excess of the €20/tonne reduction in the ethylene contract price. LDPE film prices were down by €25/tonne compared with the previous month while LLDPE film saw price rebates of up to €30/tonne.

    The L/LDPE market suffered extreme bearishness in March as a result of falling feedstock cost, high stock levels, plentiful supply and weak demand. Alongside European material, imports were also arriving, including the first imports of LLDPE film grades from the US. The high price levels and an expectation of lower prices put a brake on demand.

    Producers planned to factor the €10/tonne ethylene contract price rise into their April price negotiations and also win margin improvement. However, weak demand and continued excess supply thwarted their plans as L/LDPE prices fell by €20/tonne during the month.

    HDPE

    In March, HDPE producers managed to limit the reduction in injection moulding and blown film prices to the €20/tonne decrease in the ethylene reference price. However, the price of blow moulding grades fell by €25/tonne.

    HDPE supply was in much better balance compared with L/LDPE in March and more than adequate to meet normal seasonal levels of demand, although shortages for some pipe grades were reported. However, there were concerns that price pressure in Asia could soon lead to further supplies arriving into Europe.

    In April, HDPE producers targeted a price rise in line with the €10/tonne increase in the ethylene reference price. However, blow moulding and blown film prices remained largely unchanged while injection moulding prices increased by €5/tonne. Demand was subdued due to the high prices and an expectation of lower prices in May.

    PP

    In March, PP producers' hopes of hanging onto the cost advantage and broadening their margins after the propylene reference price fell €23/tonne soon evaporated. Supply was more than adequate and demand remained rather sluggish.

    In the end, producers were forced to reduce prices by slightly more than the cost relief. Homopolymer injection and homopolymer film prices fell by €25/tonne and copolymer injection prices fell by €30/tonne.

    The April propylene contract price settled €10/tonne higher compared with the March settlement due to rising crude oil prices. PP sellers hoped to raise notations in line with the cost increase as a bare minimum, but had to settle for smaller gains. PP homopolymer and copolymer prices increased on average by just €5/tonne last month. The PP sector was in better balance with good material availability and stable demand.

    PS

    In March, the styrene monomer reference price continued to climb sharply (up €55/tonne) ahead of the upcoming plant maintenance season. Initially, PS producers pushed through price gains in line with the higher costs, but as the month progressed it became more difficult to pass on the full cost rise.

    Demand weakened in anticipation of a significant price fall in April and stocks levels built up. Overall, PS prices increased around €30/tonne during March.

    The April SM contract price fell by €125/tonne following a sharp reduction in spot prices. PS producers managed to limit price rebates to just below the cost reduction. Producers' stock levels remained on the high side due to weak demand. While sales picked up at the start of April, demand faded during the month as further sharp price cuts were expected in May.

    PVC

    In March, the €20/tonne reduction in ethylene costs meant a pro-rata €10/tonne cost reduction for PVC. PVC base resin suppliers managed a minimal margin improvement with prices falling by just €5/tonne. Rigid PVC compound prices also fell by €5/tonne while flexible PVC compound prices actually gained €10/tonne as a result of a further increase in plasticiser prices.

    Demand for PVC pipe was lower than normal during March mainly due to the exceptionally cold weather which subdued building sector activity. Cable demand, on the other hand was brisk.

    A €10/tonne increase in the April ethylene contract price implied a pro-rata €5/tonne increase in the PVC cost base. Producers of base PVC resin successfully passed through the proportionate €5/tonne cost increase onto buyers. Building sector demand picked up as temperatures rose and fewer production restrictions lifted supply.

    PET

    In March, European PET producers managed to push prices €20/tonne higher and improve their margins, despite a reduction in the cost mix. The situation was helped by lower European production and a virtual absence of imports.

    In Europe, three PET plants were down for scheduled maintenance, Equipolymers, Plastivert and Lotte, which meant that there was just enough local material to meet demand. Furthermore, the unfavourable production situation in the US following the collapse of M&G, diverted Asian offers to North America.

    In April, moderate cost increases from the petrochemical chain were expected to push PET prices slightly higher. The supply situation improved as plants which were undergoing maintenance came back into production and Asian imports started to arrive once more. At the same time, demand was normal during April following a seasonal peak around Easter.

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