The January propylene reference also essentially followed the fall in the cost of oil and naphtha. The reduction of €35/tonne was once more somewhat short of the €40/tonne reduction in its sister product, ethylene. Most PP producers successfully resisted pressure from buyers to pass on the full cost reduction thus achieving further margin improvement. Contracts settled on average €15-20/tonne lower compared with December settlements.
PP supply is somewhat shorter than PE as producers took steps in December to reduce their output in line with expected sluggish January demand. There were also several production issues in Europe.
Demand was indeed slow in January as a result of pre-buying in November and December and slow end markets.
Upcoming maintenance shutdowns at European crackers are expected during the first quarter. This will constrain monomer availability and support PP prices.
The January styrene monomer reference price fell by only €15/tonne compared with a combined reduction of €320/tonne during the final two months of last year. Polystyrene producers sought to hold their prices amid decreasing feedstock costs to recover their profit margins following margin erosion during 2018 while buyers called for lower prices. Sellers were mostly successful in retaining all of the cost reduction with contract price rollovers the most common outcome.
Not all suppliers had sufficient quantities of material available and some reportedly sold out early in the month. There was an unscheduled outage of a large styrene production line in Terneuzen, The Netherlands.
PS demand was better than expected for the beginning of the New Year. Converters ordered as much as they could and topped up their stocks with prices being at such favourable levels.
In January, PVC producers tried to restrict price rebates to no more than €10/tonne, which was less than the proportionate €20/tonne reduction in the ethylene contract price. Converters, on the other hand, called for more than the proportionate ethylene cost reduction. Overall, producers achieved some margin gain with contract prices falling on average by no more than €10-15/tonne.
European PVC producers began the year with low stock levels, with some still recovering from plant outages. Nevertheless, most plants ran normally in January; including plants operated by Kem One and Vestolit's Marl, Germany site. Plasticisers are also more readily available following BASF lifting force majeure on plasticisers at Ludwigshafen, Germany.
Demand returned to normal levels following a slow start to the year. Converters were refilling their inventories ahead of the spring seasonal upturn in construction sector demand.
In January, the paraxylene and monoethylene glycol contract prices, the two key feedstocks for PET production, both settled €35/tonne lower. PET producers successfully resisted converter calls for bottle-grade PET prices to fall in line with the reduction in raw material costs. Indeed, PET prices were either rolled over or saw a small price reduction.
Seasonal demand was low as usual in January while PET supply was quite comfortable with most plants operating as normal. Indorama's Rotterdam PET plant restarted in January following force majeure being called in November and reached full production capacity by the end of the month. The company said that the impact from the loss of supply from the plant was minimal.
Chinese PET imports into Europe should diminish from March following the Chinese New Year holiday which could reduce material availability.