Demand restrained by worries over economy

The European standard thermoplastics market in October has seen a mixed picture in terms of price trends. For polyolefins, the picture is one of either rollover to small price increases. For polystyrene, PVC and PET, prices have continued to fall.

L/LDPE producers initially targeted price increases of up to €150/tonne, despite a €45/tonne reduction in ethylene costs. Weak demand and competitively-priced imports however meant that L/LDPE prices traded between a rollover and a small increase. HDPE prices gained up to €50/tonne as producers were able to factor in higher energy costs.

Polypropylene prices also increased following five consecutive months of price reductions. PP prices rose by €20/tonne despite a €50/tonne drop in the propylene reference price.
Polystyrene prices continued to fall even though the styrene monomer reference price increased by €9/tonne in October. Producers took account of lower energy costs and weak demand. PVC prices fell as a result of low demand and a growing inflow of cheaper imports. Bottle-grade PET contract prices also fell sharply in October as a result of aggressive import prices, lower costs and weak demand.

Weak demand
Polymer demand remained well below normal levels across all product classes in October. Converters are concerned about the deteriorating economic situation and worries about a possible recession.
European converters are also increasingly looking to meet more of their needs with cheaper imported material. Import prices are more competitive as a result of falling freight rates out of Asia, which are now at their lowest since 2020. There were however some signs that buyers are tentatively building stocks in anticipation of a stronger price upturn soon.
Packaging and pharmaceuticals demand is holding up fairly well, but demand from other sectors such as construction, consumer goods and furniture, is declining.

Supply low
European producers have trimmed production and brought forward plant maintenance programmes in response to the low demand. There is however sufficient material available to meet the needs of converters. Supply has also been supported by a steady inflow of imported material. The high price levels in Europe and lower freight rates are tempting sellers to divert more of their cargo to Europe.

A summary of the latest production issues is presented below:

• The 350,000tonnes/year LDPE plant in Ruwais, Abu Dhabi run by Borouge is expected to resume operations by end 2022 
• Indorama Ventures declared force majeure on production of PTA and PET in Rotterdam, the Netherlands on 18th October
• TotalEnergies has declared force majeure for PP throughout Europe after encountering “technical problems” at its two large Belgian polypropylene plants in Feluy
• Trinseo is revisiting plans to shutter its 300,000tonnes/year loss-making styrene monomer plant in Böhlen, Germany 
• Borealis restarted propylene production on 1st October at its Belgium cracker
• The LyondellBasell cracker in Berre, France, offline since a fire in August 2022, and will not go back onstream until early 2023
• On 27th September, workers at eight refinery and petrochemical sites in France belonging to TotalEnergies began a three-day strike, aiming for a complete blockade of the group’s refineries and fuel depots
• Major maintenance work on the OMV cracker in Burghausen, Germany is almost complete, and the plant is being gradually restarted.

November outlook
Polyolefin prices may follow a stable to firmer trend in November provided current market fundamentals hold. PVC, PET and styrenics markets, however, may well follow a stable to softer trend as price levels remain at historically high levels despite recent price decreases.

L/LDPE
At the beginning of October, European L/LDPE markets reversed direction following five consecutive months of strong price reductions. Despite a drop of €45/tonne in the ethylene contract price, producers originally called for prices to increase by €150/tonne, including a portion to cover the higher cost of energy. Buyers strongly resisted calls for such large price hikes and deals were generally settled between a rollover to a small price rise.

L/LDPE demand remains well below normal, although a small upturn after the holiday period was noted. Converters are concerned about the deteriorating economic situation and worries about a possible recession.

European producers have trimmed production in response to the low demand and material availability has also been impacted by strikes in France. A lively inflow of imports has however made up for the drop in local supply.

HDPE
At the beginning of October, European HDPE markets reversed direction following five consecutive months of strong price reductions. Despite a drop of €45/tonne in the ethylene contract price, producers originally called for prices to increase by €100/tonne, including a portion to cover the higher cost of energy. HDPE sellers pushed through a sizeable proportion of the planned cost rise with prices rising by €50/tonne.

HDPE availability is slightly tighter compared to L/LDPE following production cutbacks and the impact of strikes in France. There is however sufficient material available to meet the needs of converters.

Converters are concerned about the deteriorating economic situation and worries about a possible recession. Hence, HDPE demand remains below normal, although a small upturn was noted as converters started to slowly build up stocks in expectation of an imminent price upturn.

PP
European PP producers initially tabled planned price hikes of €50-100/tonne, including an energy surcharge, despite a €50/tonne lower propylene settlement. This follows five straight months of hefty drops. The initial hike requests were trimmed as underlying demand remained weak and energy surcharges could not be fully reflected on transactions. Settlements varied widely; from a rollover to price increases of up to €50/tonne.

PP demand remains at a low level, although it has been noted that some players are tentatively building up stock levels in anticipation of a price upturn soon.

PP producers have trimmed production run rates by 20-30% in recent months in an effort to achieve better market balance. Material availability has also been disrupted by strikes and planned and unplanned plant shutdowns. Supply has however been supported by a steady inflow of imported material.

PVC
PVC producers mostly began October prepared to accept slight price decreases in view of the subdued demand, competitive import costs and a fall in ethylene costs. Accordingly, base PVC prices fell by €25-30/tonne to hit a new year-low. Producers were reluctant to issue larger drops due to the high production costs in Europe when compared to the rest of the world.

Producers have reduced run rates in order to achieve a better demand-supply balance. Local supply gaps are more than adequately filled by competitively-priced imports from the USA and India. High European prices are tempting sellers to divert more of their cargoes to Europe.

Purchasing activity has slowed further in October across all end-use markets, with the exception of pharmaceuticals. Stock levels at converters are comfortable amid growing uncertainty about economic prospects going forward.

PS
Polystyrene prices dropped again in October despite a €9/tonne rise in the styrene monomer reference price. Producers took into consideration a reduction in energy costs and low demand. General-purpose polystyrene (GPPS) prices fell by €50/tonne with high-impact polystyrene (HIPS) prices down by €40/tonne. Further price discounts are expected later in the month.

PS supply is more than adequate to meet the subdued levels of demand despite production cutbacks and the declaration of force majeure by a major producer at a site in France.

Demand has fallen due to growing concerns about an economic downturn and inflation. While packaging demand has held up fairly well, purchasing activity from other end-use sectors such as consumer goods and furniture is declining. A downturn in the construction sector has also adversely affected demand for GPPS and expanded polystyrene (XPS).

PET
PET prices have fallen for the third consecutive month after reversing direction in August. PET contract prices were down by €80/tonne in October as a result of aggressive import prices, lower costs and weak demand.

European PET producers have been under growing pressure from aggressive import offers, mainly from Vietnam, India, South Korea and China. Import prices are more competitive as a result of falling freight rates out of Asia, which are now at their lowest since 2020. While PET demand for local product remains low. European converters are increasingly meeting more of their needs with cheaper Asia material.

PET producers, who are stuck between higher costs and weaker consumption, have lowered run rates or conducted maintenance shutdowns. However, this did little to support overall sentiment and prices are more likely to extend losses into November.