Bearish market conditions in November

L/LDPE

In November, L/LDPE contract prices fell in line with the €30/tonne reduction in the C2 reference price. 

Material availability returned to more normal levels as several production plants resumed operations following outages and producers ended production cutbacks. However, producers are expected to slow down output by mid-month in time for customers to begin their winter break. One producer is planning to switch off all C4 material to take off some of the pressure. 

While PE film demand started to return to more normal levels in November it is still below producers’ expectations. The widespread criticism of plastics in the media appears to be having a negative impact on market sentiment. 

For December, following a €10/tonne rise in the ethylene contract price L/LDPE prices can be expected to either remain unchanged or show a small rise.

HDPE

In November, HDPE blow moulding, injection moulding and blown film product prices matched the €30/tonne reduction in ethylene costs. 

Material availability was good in November as most European production plants operated as normal after several plant outages in recent months. There was also a significant volume of imported blow moulding and injection moulding material available from North America. 

Polymer demand was better last month as converters bought additional material ahead of Christmas business. Order intake for blow moulding product from the automotive industry continued to disappoint while construction sector activity was better than expected. 

For December, the most likely scenario is for a price rollover. While the December ethylene contract price settled €10/tonne higher demand is expected to dwindle in the run-up to the Christmas break. There will also be plentiful supply and continued import pressure.

PP

In November, PP homopolymer film and homopolymer injection prices declined in line with the €30/tonne reduction in the propylene contract price. Copolymer injection prices declined by slightly less than the C3 reference price as the impact of force majeure at LyondellBasell’s Carrington UK plant began to have an effect on supply. 

Most other PP production plants operated as normal and supply was more than sufficient to meet demand. 

Order intake saw a welcome improvement last month although volumes were less than would normally be expected for the time of year. 

The most likely outlook for December is for unchanged prices after the propylene reference price settled €5/tonne higher. Demand is likely to be very low as converters take a long winter break. Producers are expected to respond by reducing operating rates to very low levels.

PS

Bearish expectations in the styrenics sector led to further downward price pressure last month. Sellers initially hoped to restrict price rebates to around the €65/tonne level, similar to the decline in the styrene monomer reference price. However, given plentiful supply ad low demand, sellers were forced to yield to buyers’ demand for even lower contract settlements. 

Furthermore, when it became clear towards the end of the month that prices would likely fall further in December, the price reductions went even further. Overall, general-purpose polystyrene prices fell €70/tonne compared with the previous month. 

For December, the SM reference cost was fixed €47/tonne lower compared with November and hence further price rebates are expected. Polystyrene is likely to remain oversupplied for the time being. Demand will be restrained by the holiday period and subdued nature of the economy.

PVC

PVC base resin producers initially called for a price rollover last month in an effort to improve margins. However, following the €30/tonne fall in ethylene costs, converters insisted that they should benefit by a pro-rata cost reduction of €15/tonne. For PVC compounds, prices fell by less than C2 due to a reduction in the cost of additives.

Following several plant outages in recent months, supply was much improved in November as PVC production returned to more normal levels. Demand was reasonable with the key building and construction sector ordering at close to normal levels. 
The outlook for December is for stable PVC prices. A €10/tonne fall in the December ethylene contract price implies a pro-rata reduction of €5/tonne in the cost of PVC production. However, order intake is likely to turn down sharply after mid-month.

PET

European PET prices continued on a downward path last month in a bearish market. The key paraxylene feedstock reference price was eventually fixed as a rollover for November after prolonged negotiations. 

Despite producers’ efforts to stabilise contract prices, PET prices fell by €20/tonne due to a combination of oversupply and weak demand. In the spot market, PET prices tumbled towards the €800/tonne mark amid pressure from a growing supply of competitively-priced imported Asian material.

While European PET producers continued to control production levels, higher imports ensured that an oversupply situation remained. Furthermore, converters were in no hurry to buy additional volumes as stock levels remained more than adequate. 

For December, PET prices are likely to fall further. Feedstock costs are expected to decline further, material availability will remain plentiful while demand is unlikely to improve.