Polymer pricing: Buyers resist polyolefin producers’ call for price hikes

European standard thermoplastic prices have remained largely unchanged since the beginning of the year. Polyethylene and polypropylene feedstock contract price settlements provided no stimulus for price change. 

Styrene monomer (SM) and bottle-grade PET raw materials are the only feedstock costs to have changed compared to closing December 2019 levels. Polyethylene and polypropylene producers announced quite hefty price increases both in January and in February despite the unchanged cost base. They cited an urgent need to broaden margins after a long period of under-performance. However, the market supply-demand dynamics were simply unhelpful to their cause, and in most cases they were rarely successful in raising notations. Within polyolefins, only LLDPE film, HDPE film and PP homopolymer injection material managed small price increases since the turn of the year.
The styrene monomer reference price has increased €114/tonne since the New Year. The SM cost has been rising as a result of a sharp increase in benzene and planned and unplanned production outages, which limited European plants’ output. 

In January, general-purpose polystyrene prices more or less tracked the €64/tonne rise in SM costs, which was almost in line with what producers were targeting. However, during the following month, due to over-supply, producers’ price targets of €70-100/tonne were not met in full as GPPS and HIPS prices increased in line with the €50/tonne SM cost increase. PVC base resin producers will continue to push hard for higher prices late February and into March as they maintain that profit margins have been squeezed to unacceptable levels. 

PVC producers were largely unsuccessful in raising notations during the first two weeks of February as they had hoped for, but a small rise towards end February was evident. Rigid and flexible PVC compound prices dipped slightly in January due to lower additive costs.

January contract prices for paraxylene and monethylene glycol, the key precursors for PET production, were only settled mid-February amid very difficult negotiations. Overall, the PET cost base increased by almost €20/tonne. Bottle-grade PET prices generally remained stable through January while February PET prices also haven’t change by very much.

Mixed supply picture

Ethylene and propylene production ran at a high level while polyolefin producers maintained production cutbacks in view of the low demand. There were also a few production issues limiting PP production. For styrene monomer, planned and unplanned production outages limited plants’ output, but polystyrene supply remained high. PET supply also remained on the high side. 

There were continued high import volumes of HDPE injection and blow moulding material from the US and a steady inflow of PET imports from Asia.   Several maintenance turnaround at cracker and polymer plants are planned for March, which could restrict material availability.

Demand recovers

Demand has picked up steadily for most polymer classes since the turn of the year following several months of disappointing sales. However, some buyers were still holding back from purchasing more than was absolutely required given the expectation of possibly lower prices to come in March.

March outlook

In March, the ethylene and propylene contract prices are expected to settle lower as a result of downward movement in crude oil and spot prices. Producers can be expected to continue pushing for higher prices, as in their opinion, margins are too low. The maintenance turnarounds scheduled for March should tighten material availability. On the other hand, buyers will resist any attempt to raise prices, especially if costs continue to fall.

L/LDPE

The plan by L/LDPE producers to raise prices by €50/tonne soon disappeared after the January ethylene contract price settled on a rollover. LDPE prices remained unchanged during January while LLDPE saw gains of around €10/tonne. Demand became a little livelier as the month progressed although still disappointing for the start of the New Year. In February, the ethylene contract price once again remained unchanged. With Chinese demand being restrained by the coronavirus outbreak, a surplus was starting to build up both for feedstock and further downstream. L/LDPE producers attempted to raise prices by €30/tonne without any notable success. Prices were largely rolled over with just occasional increases for specialty grades. Demand started to resemble more normal levels in February after several months in the doldrums. In March, the ethylene contract price is expected to settle lower.

HDPE

HDPE producers originally planned to raise prices by €50/tonne at the start of the New Year to improve their thin margins. However, their plans soon dissipated after the January ethylene contract price was rolled over from December. HDPE prices saw very little development during the rest of the month with only small gains for blown film grades. A significant inflow of competitively-priced US imports kept a lid on European HDPE prices. Local producers responded by restricting production. The February ethylene contract price settled at the same level as in January. Despite this, most producers called for price increases of €30/tonne. There were only occasional price increases for some specialty grades or where prices were already at a low level. Material availability for blown film and blow moulding was balanced while injection moulding availability was longer.

PP

The PP market experienced limited price development at the beginning of the New Year following a rollover for the January propylene reference price. Producers tried to raise notations for some specified grades but there was no overall upward momentum. Demand was much better than expected as converters replenished inventories ahead of an expected springtime order upturn. Material availability was normal with most facilities operating without disruption. A similar pattern emerged in February with the propylene reference price being rolled over and producers trying to push through price increases of €20-30/tonne. While there were small gains for homopolymer injection grades, prices for most other PP grades remained unchanged. Buyers stood firm against paying more for polymer when input costs were stable. Most plants continued to operate without interruption while demand remained at normal levels during February.

PS

In January, polystyrene prices turned upward again following three months of declining notations. A €64/tonne rise in the styrene monomer reference price provided the impetus for producers to lift PS prices by almost the full amount of the cost increase, despite abundant material supply. The surcharge for the high-impact material generally remained at €90-100/tonne. PS sales were good as converters replenished their inventories. In February, the styrene monomer reference price settled €50/tonne higher compared to the previous month. PS producers responded by tabling planned price hikes ranging from €70-100/tonne. With continued over-supply, producers’ price targets were not met as GPPS and HIPS prices tracked the SM cost rise. Furthermore, some buyers were prepared to wait and see how feedstock costs develop into March. The March SM reference price is expected to decline due to lower energy prices.

PVC

In January, most base PVC resin deals were concluded on a rollover compared to the previous month after the ethylene contract price remained unchanged. Despite the stable PVC cost base, both rigid and flexible PVC compound prices slipped €5-10/tonne due to respective reductions for titanium dioxide and plasticiser costs. PVC demand ran at a reasonable level during the first month of the year. PVC producers announced planned €50/tonne price hikes for February, citing a need to widen dwindling margins. However, these calls were largely unsupported especially as the February ethylene contract price was again rolled over and energy cost were heading downward. European PVC demand continued at reasonable levels and exports increased significantly. PVC sellers will continue to push for higher prices late February and into March, although buyers will point to lower stable feedstock prices.

PET

January PET feedstock contract prices were finally settled in mid-February following protracted negotiations. The contract price of paraxylene settled €17. 5/tonne higher than in December while the monoethylene glycol (MEG) contract price increased by €20/tonne. Therefore, the PET cost bae increased by almost €20/tonne. PET prices generally remained stable through January although there were small gains for top of the range specified grades. February PET prices are also not expected to change much. The European PET market remains over-supplied despite production cutbacks being made by most producers. There is also still a steady inflow of competitively-priced imported Asian material. Bottle-grade PET resin demand was flat during the first month of the year and February order intake was also expected to remain slow. PET producers are pinning their hopes on a seasonal demand upturn in March.