Severe feedstock shortage drives up PET prices

In June, rising feedstock costs led to significant price increases for standard thermoplastics. The polymer price increases either matched the cost rise, or in most cases, fell some way short of the cost rises. However, for PP copolymers and bottle-grade PET price increases were even higher than the cost rise as a result of supply tightness.

Many converters were reluctant to buy as the month progressed as falling naphtha notations fuelled speculation about possible price cuts in July. Furthermore, this month marks the beginning of the holiday season, which will put pressure on demand.

Bottle-grade polyethylene terephthalate (PET) prices increased well above the €60/tonne rise in the key paraxylene feedstock in June. The European market faced further supply tightness last month due to the persistent drought on availability of the PTA feedstock as the force majeure remains in place at BP's plant in Geel, Belgium. Some PET producers were unable to meet their contractual obligations to customers, a situation which is expected to persist for at least a few more months. With seasonal demand for beverage bottles reaching a peak, buyers were left searching for scarce material.

Low-density and linear low-density polyethylene (L/LDPE) producers were seeking price increases which at least compensated for the €63/tonne rise in the June ethylene contract price. For small sized contracts prices were increased almost in line with the cost rise. However, for large and medium-sized contracts price increases fell some way short of the cost rise. The LDPE supply position is now in better balance, but LLDPE remains short. Converters bought cautiously in expectation of lower prices this month.

Following a €63/tonne rise in the June ethylene contract price high-density polyethylene (HDPE) suppliers attempted to raise contract prices in line with the rise in the cost base. However, HDPE price gains fell short of the planned hikes registering gains of around €50/tonne. Blow moulding material was well supplied but blown film and injection moulding grades were tighter. Demand was subdued across most end sue sectors with converters reluctant to buy excess stock given an expectation of lower feedstock cost settlements this month.

The June propylene contract price settled €80/tonne higher mainly as a result of cutbacks in ethylene production which limited the availability of propylene. The rise in propylene costs led to a rise in polypropylene (PP) prices. Homopolymer prices increased more or less in line with the cost rise whereas copolymer prices increased by more than the cost rise. Homopolymer supply was more balanced but many copolymer grades saw restricted availability due to plant maintenance shutdowns. PP demand was at normal levels.

In June, a €63/tonne increase in the ethylene contract price implied a proportionate cost increase for polyvinyl chloride (PVC) of just over €30/tonne. Initially, PVC producers called for price hikes of €40-50/tonne to improve their profit margins. However, a well-supplied market and buyer resistance limited price increases to €20-30/tonne. Most PVC plants were running without disruption and imported material could be found in southern Europe. Demand was below expectations as many converters considered that prices would be lower in July.

In June, general purpose polystyrene contract prices increased €45-50/tonne on the month, slightly lagging the €60/tonne rise in the styrene monomer reference price. The premium for high-impact polystyrene remained at €100/tonne despite butadiene costs rinsing €140/tonne. PS producers were keen to pass through in full the monthly feedstock rise, but converters resisted. Sufficient material was available from local producers but import volumes were low. However, demand was mixed as buyers minimized purchases as they anticipated price drops in July.