Oversupply forces L/LDPE lower as costs rise

Oversupply forces L/LDPE lower as costs rise

Price development for the various standard thermoplastic material classes varied in May, with modest price movements up and down, depending on feedstock contract price settlements. A spike in naphtha prices on the back of an overall rising crude oil price, sparked an increase in the ethylene and propylene contract prices for May.

For polyolefins, there were quite different price movements for L/LDPE, HDPE and PP. L/LDPE prices fell despite a €20/tonne rise in the ethylene contract price. L/LDPE prices were between €5-10/tonne lower compared with April closing levels. This was mainly as a result of continued surplus supply and subdued demand.

HDPE, where supply is tighter, registered gains of around €15/tonne, still less than the increase in feedstock costs. Polypropylene prices were also firmer with a rise of €15/tonne, which was again less than the €25/tonne rise in the propylene contract price.

Polystyrene prices fell again in May following the triple-digit decline in April. General-purpose PS product prices dropped by around €30/tonne compared with a €40/tonne reduction in the styrene monomer reference price, meaning producers slightly improved their profit margins.

PVC base resin prices saw modest price gains while flexible PVC compounds increased by a bit more due to the high plasticiser prices.

Bottle-grade PET prices saw another spurt in May as a result of production outages at a major PTA producer and strong seasonal demand.

Supply variable

On the feedstock front, ethylene remained over supplied in May although the market was slightly more balanced since the spate of exports in April. The propylene market was showing signs of tightness on upcoming planned turnarounds in Europe, The styrene monomer market was more in balance due to imports from the US.

L/LDPE product remained over supplied while HDPE and polypropylene material was somewhat tighter. The PVC market is was good balance with polystyrene availability remaining on the long side. The PET sector was short of PTA as a result of the afore-mentioned plant outages.

There were few new unplanned plant outages announced in May. However, JBF Industries declared force majeure on PET from the company's production facilities in Geel, Belgium on 16 May as a result of a feedstock shortage. One of its main feedstock suppliers declared force majeure 4 April, and had further reduced availability on 16 May, after which JBF started to receive only 20% of its contracted volume of the feedstock. As a result, the company put 20% allocation on balance May volumes, with immediate effect. BP is reportedly supplying PTA.

There were reports of logistics problems and delivery delays as many haulage companies took advantage of the bank holidays to extend the weekends.

Demand disappoints

Polymer demand was rather more subdued than would normally be expected during the month of May. It appears that many buyers had sufficient stocks of material and were adopting a more cautious ‘wait-and-see' approach. The numerous long weekends due to public holidays in May also disrupted production with many converters turning off production lines for a few days.

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