Producers raise planned hikes as costs escalate  

In March, polymer markets were being deeply affected by the uncertainty and sharp rise in energy costs caused by the war in Ukraine. At the beginning of the month, polymer producers called for price increases either in line with the rise in monomer costs or just ahead of the cost increase.

By the second week of the month, however, polymer producers returned to the market with even higher price targets due to escalating crude oil and energy costs. In polyolefins, producers submitted calls for hikes of up to €250/tonne for LDPE, €300/tonne for LLDPE, and €330/tonne for HDPE and PP. Styrenics producers raised their March price target from €125/tonne to €350/tonne to factor in higher energy costs.

Hence, further large price increases are on the cards during the remainder of the month, at least for polyolefins and styrenics.

In February, polymer producers announced ambitious price hikes aimed not just at recovering cost increases but also improving profit margins. They were in for quite a surprise. Demand was simply not strong enough to support a significant price increase while material availability was more than sufficient.  

L/LDPE prices actually fell by €40/tonne, HDPE prices either rolled over or were slightly above a rollover, while polypropylene prices presented a mixed picture. PET prices continued to climb and PVC also maintained a firm upward price trajectory. Polystyrene prices fell slightly more than the reduction in styrene monomer costs.

Supply improves

Material availability for polyolefins, polystyrene and PET has improved over the last two months as several production plants have resumed operations after outages and imports have started to arrive in larger quantities. PVC supply, however, is likely to remains tight for a while yet.

Most producers were able to meet contractual obligations for standard material without delay, but others experienced a shortage of certain specialty grades.

In the second week of March, two major producer stopped all new March offers on European PE citing rising costs.

Some of the latest plant outages are summarised below.

• Vynova announced a partial turnaround for maintenance at its Belgium VCM plant from 1st March to 1 April
• Ineos shut down its PP plant in Belgium and its HDPE plant in France on 15 March for planned maintenance
• Sabic’s LLDPE/HDPE swing plant in Gelsenkirchen, Germany reportedly would be unable to produce its Supeer LLDPE (C6) metallocene grades in March and April
• Inovyn shut down its VCM plant in Norway for one month on 1st March for planned maintenance
• Vinnolit shut down its PVC plant in Germany on 24 February for planned maintenance.

Demand mixed

Demand has picked up over the last two months after a slow start to the year, but the picture is mixed. Some converters are sitting on ample stocks or don’t have the funds to buy additional material. Others are ordering more material in view of an expectation of sharply rising prices.

April Outlook

For the rest of March and into April, the polymer price outlook is extremely uncertain. On the one hand, while crude oil prices have risen significantly following the invasion of Ukraine by Russia, oil prices dropped significantly on 10th March. It remains to be seen how crude oil prices will move during the rest of the month. It appears most likely, however, that April petrochemical feedstock cost settlements will increase once again. Polymer producers will target full recovery of material and energy cost increases, but will face strong buyer resistance.

L/LDPE

In February, L/LDPE producers failed in their attempts to pass through the  €67.5/tonne ethylene cost increase to converters and prices actually declined due to weak demand. This month, the ethylene contract price again increased sharply, up €95/tonne. Sellers took a firm stance on their initial hike requests and L/LDPE prices for the most part just exceeded the rise in feedstock costs.

Demand was fairly tepid at the start of the year and then failed to recover as expected in February. In March, however, some buyers sought additional volumes to hedge against likely future price hikes. On the other hand, others were cautiously buying amid widespread uncertainties and slowdown in their end markets.

While L/LDPE availability improved slightly in February, supply has tightened once again this month as there were fewer imports arriving into Europe than expected.

HDPE

In February, producers attempts to pass through higher ethylene costs in full were unsuccessful due to low demand. Producers were settling for price rollovers for injection moulding and blow moulding while blown film prices declined €20/tonne.

This month producers were successful in their attempts to raise prices in excess of the €95/tonne increase in ethylene costs. March deals conducted early in the month were closing with price increases either matching the monomer hikes or with a premium of €5-10/tonne.

Demand picked up slightly in March after a slow start to the year. Construction was the liveliest sector while automotive orders remained weak.

Supply has improved slightly with a larger volume of imports available to European buyers and higher production levels in Europe. However, the availability of certain specialty blow moulding and film grades remained quite limited.

PP

In February, the propylene contract price increased €67/tonne. Initially, sellers attempted to pass through the monomer cost increase in full, but buyers were unimpressed and strongly resisted such significant price hikes. PP producers were later forced to revise their price targets. Homopolymer film saw small gains while homopolymer injection and copolymer injection prices fell.

This month, PP producers not only passed through the entire €95/tonne rise in propylene costs to buyers but also managed to factor in a premium of €20-30/tonne.

Material availability has improved despite some plant outages, aided by a rise in imports from the US and the Middle East. While specialty film grades are in short supply, most contracts for standard material were fulfilled.

PP demand is gradually recovering as the spring season approaches and buyers are concerned about further hefty price hikes ahead.

PS

A fall of €51/tonne in styrene monomer (SM) costs in February contributed to a €60-65/tonne decline in PS prices. The larger reduction in PS prices over SM is largely attributable to an easing in energy costs.

In March, PS prices resumed an upward trend, mainly supported by an increase of €93/tonne in the styrene monomer reference cost. Regional styrenics suppliers tabled planned price increases ranging from €85/tonne to €125/tonne. Substantial price increases were implemented aided by the growing uncertainty in the market caused by the war in Ukraine.

There were no major production issues impairing European supply and two PS plants returned to production following outages. Demand has recovered slightly after a slow start to the year. Some converters are sitting on ample stocks while others sought to buy additional material with prices set to rise further.  

PVC

In February, PVC prices resumed their upward trend as producers successfully passed through approximately half of the €67.5/tonne ethylene cost rise onto PVC base prices. PVC compound prices increased by more than base PVC resin as a result of higher plasticiser, titanium dioxide and other additive costs. In early March, PVC base prices again matched the proportionate rise in ethylene costs.

While material availability has improved somewhat, supply remains tight despite some returning capacities. The spring maintenance season is however arriving, thus further limiting supply. There is insufficient imported material arriving from the US and Asia, while strikes halted production at four PVC sites in France during February.

PVC demand was livelier in February and March after a slow start to the year. Construction remains the key demand driver while pipes and automotive sales was more subdued.

PET

By mid-February, PET prices were mostly being settled on a rollover basis. As the month progressed, however, upward pressure on prices became more apparent and by end-February, bottle-grade PET prices had risen by €10-20/tonne.

There was growing concern about the availability of PTA, upstream costs were rising sharply, imports were becoming more expensive and there was mounting pressure on buyers who had held back from purchasing earlier in the year, to refill their warehouses.

In March, PET prices increased sharply amid growing uncertainty. The February paraxylene contracts in Europe were agreed at a split settlement, indicating €90/ton hikes from January. The availability and cost of imported material is of growing concern for converters. Planned and unplanned plant outages are also threatening supply. Furthermore, the spring buying season for beverages bottle-making is just around the corner.

European petrochemical feedstock contract prices; January - March 2022  (€/tonne)

 *March paraxylene contract price not settled at time of writing

Source: Sustainable Plastics