Demand slows ahead of holiday season

At the beginning of July, standard thermoplastic producers fought to improve margins following either lower or stable feedstock cost settlements. However, by mid-month the forces of demand and supply conspired to force sellers to give away a portion of the cost saving to buyers. Demand was subdued in the run up to the summer holidays while most polymer classes, with the exception of L/LDPE and PET, had adequate stocks of material.

In July, PE prices had shed around €5/tonne by mid-month compared with a €15/tonne reduction in the ethylene reference price with pressure for higher rebates likely to mount towards end July. Polystyrene producers attempted to pocket as much of the cost reduction as they could but by mid-July had given away between €30-40/tonne of the €50/tonne styrene monomer cost reduction. Polypropylene prices remained unchanged in a well-balanced market. Meanwhile, PVC prices, while moving sideways, were under growing pressure. The tightness facing PET supply eased and prices were much more stable than in recent months.

Supply variable

Material availability varied between polymer classes in July. Stocks were lower in the polyethylene sector as producers whittled down the excess stocks that had built up during earlier months. Polypropylene and styrenics were balanced markets while PVC experienced minor disruption as a result of strike action in France. Meanwhile, PET remains extremely tight due to PTA feedstock shortages, although there were signs that the supply restrictions were beginning to ease.

A summary of recent supply-related developments are presented below:

BP will carry out maintenance lasting about a month at its two steam crackers at Gelsenkirchen in Germany starting mid-August.

Ineos declared a force majeure on oxo-alcohols production at its 330,000 tonnes/year oxo-alcohols plant in Lavera, France, 28th June following a problem in one of the plant's compressors

Since 23rd June 2018, the plants operated by Arkema and Ken One in Saint-Auban, France, came to a standstill due to a strike by more than 100 employees at Arkema and an unspecified number at Kem One. This affected PVC production and compounding at the Kem One site that is reached via the Arkema access road, as well as Arkema's chlorine and trichloroethane lines. The strike for the time being, come to a halt 2nd July and the plants were up and running again.

Total declared force majeure 22nd June for supplies of HDPE from the plant at Gonfreville, France due to "unexpected technical disruptions occurred during the re-start of the production line after a maintenance turnaround," which meant it was unable to comply with relevant supply commitments.

Lithuania-based Neo Group's new 160,000 tonnes/year polyethylene terephthalate line started production late June.

Demand slows

Polymer markets were fairly quiet last month as the August holiday season approached. Converters were also waiting to see whether polymer prices slip further before making additional purchases. HDPE and PVC pipe demand held up reasonably well, while PS and PP demand was also in line with expectations. In contrast, PE demand was below normal levels.

August outlook

Polymer prices are likely to have come under further downward pressure towards the end of July as demand peters out prior to the start of August summer holidays. Markets are expected to be calm during August with many converters, especially those in Southern Europe, closed down for the month. With August feedstock cost settlements considered unlikely to move by much and supply improving, polymer prices could be under further downward pressure.

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