Polymer prices: tight supply and strong sales drive prices to new highs

European standard thermoplastics saw further massive price increases over the last two months, although the rate of increase is slowing down. In April, all polymer classes registered gains well in excess of the feedstock cost increases. In May, however, polymer price rises, still, by and large, exceeded the relatively small increases in costs, but the gap narrowed.

The extremely tight supply situation eased a little during May while growing buyer resistance persuaded sellers to backtrack and to accept much smaller price rises.

PE prices have risen €270-370/tonne during April and May compared to a €45/tonne rise in ethylene costs. PP prices have increased €320-370/tonne over the same period compared to a €55/tonne rise in propylene costs. Base PVC prices have risen €200/tonne more than the pro-rata ethylene cost increase, while PS prices have increased by €385/tonne, slightly less than the €399/tonne rise in styrene monomer costs. Meanwhile, the upward PET price trend came to a halt in May.

Supply low

In April, material availability remained very tight across all polymer classes as a result of more plant outages and a lack of imported material. While supply remained tight in May, there was a noticeable easing in availability.

The latest supply-related developments are summarised below.

• Shin-Etsu declared force majeure (FM) for the production facilities of Portuguese subsidiary Cires late May due to insufficient supply of vinyl chloride monomer (VCM)
• Vestolit declared FM for PVC from its plant in Marl, Germany “due to an unforeseeable production problem”
• LyondellBasell declared FM on PP supplies from Germany 25 May due to technical issues
• Ineos declared FM at the Geel, Belgium PP plant April 20 and resumed operations on 17 May
• SABIC is to shut down its Netherlands plant for maintenance for two weeks in May and June.
• Due to a “safety issue” at one of the two VCM lines operated in Tessenderlo, Belgium, Vynova declared force majeure on PVC 6 May
• LyondellBasell declared FM on PP from its Ferrara, Italy plant 3 May
• Total declared FM on LDPE from Carling, France on April 16 following disrupted ethylene availability due to a crack in the Trans Alpes pipeline
• Ineos declared FM on mLLDPE supplies from Cologne, Germany following an unplanned outage on April 6
• PlastiVerd declared FM on PET production from El Prat de Llobregat, Spain on March 26 due to feedstock disruptions related to the Suez jam
• Ineos declared FM for deliveries of HDPE pipe and blow moulding grades from Lillo, Belgium on 2 April following a power failure.

Demand mixed

Demand for PE and PVC remained at high levels during April and May driven by the food, beverages, pharmaceuticals and construction sectors. PP and PS demand was more restrained in May as buyers decided to stop buying amid widespread expectations of seeing a reversal in June. PET demand disappointed as a result of COVID-19 restriction measures and the cold weather across Europe.

June outlook

Polyolefin and PVC sellers are likely to call for further price increases in June after feedstock costs for ethylene settled €30/tonne higher and propylene settled €40/tonne higher compared to the previous month. While supply remains low, lower-priced PE imports are once again expected to arrive into Europe, which could undermine producers’ price hike plans. Also, the prospects for producers to raise prices even higher are diminishing due to buyer resistance. PS prices should tumble after styrene monomer costs fell €401/tonne. PET prices will also be under further downward pressure.

Western European standard thermoplastic prices, €/tonne

L/LDPE

L/LDPE prices continued on a sharp upward trajectory in April with hikes only slightly less than the €250/tonne increases seen in the previous month. Material shortages were exacerbated by further force majeure announcements and plant maintenance shutdowns. Imports from the US and the Middle East were virtually non-existent. Strong end market demand was driven by the food & beverages and pharmaceuticals sectors.

The month of May began with L/LDPE producers calling for price increase of €250/tonne despite only a €5/tonne rise in the ethylene contract price. While supply remained short, there were signs that more material was becoming available compared to previous months. Supply was mostly available to meet contractual obligations and some new projects while demand remained at a high level. As a result, LDPE prices increased by €125/tonne with LLDPE prices rising by €65/tonne.

HDPE

HDPE producers were able to push through further massive price increases without much opposition amid continued supply shortages. Blown film grades traded around €240/tonne higher comparted to March with blow moulding and injection moulding product rising around €220/tonne. Local supply was further restrained by force majeures and the start of the plant maintenance season while imports were lacking. Demand from the automotive and construction markets was particularly high.

HDPE producers called for price increases of €250/tonne at the start of May, but a slight improvement in the supply situation put a brake on planned price hikes. Blown film prices increased by €70/tonne with blow moulding prices rising by €60/tonne and injection moulding grades up by €40/tonne. Construction sector demand for blown film remained high, but automotive sector demand for blow moulding product eased back a little.

PP

PP producers pushed through further enormous price hikes of around €270/tonne in April as supply shortages worsened. European PP output declined as a result of planned and unplanned plant outages as well as a lack of imported material from the US. Demand was strong across most end markets as converters sought to buy whatever scarce supplies they could find.

PP producers tabled planned triple-digit price hikes for the month of May despite only a €10/tonne rise in the propylene contract price. However, strong buyer resistance persuaded sellers to backtrack and to accept much smaller price increases than initially planned.

Many buyers decided to stop buying in May amid widespread expectations of seeing a reversal in June. As a result, homopolymer injection prices increased by €70/tonne with homopolymer film and copolymer injection prices each rising by €50/tonne.

PS

PS prices soared once again in April following a €312/tonne settlement to the styrene monomer reference price. Sellers refrained from calling for further margin-extending hikes in view of the high price levels and settled for gains of around €300/tonne compared to March closing levels. Supply continued tight in April and had to be allocated. Demand was restrained as many converters held back from buying in view of such high prices.

Polystyrene producers announced planned price increases of between €90-105/tonne from 1^st May, which was slightly above the €87/tonne increase in the styrene monomer cost settlement. However, PS price increases for May were generally settled around the styrene monomer cost rise. The very tight supply situation eased a little last month. Converters limited their buying to the bare minimum in anticipation of falling prices in June.

PVC

Once again PVC prices increased well in advance of the pro-rata €20/tonne increase in ethylene costs in April. PVC producers had no trouble in raising notations on average by €130-140/tonne.

PVC prices continued their advance in May but the rate of increase slowed down. Base PVC prices increased by €85/tonne, which again bore no relation to the tiny pro-rata €2.5/tonne ethylene cost rise. PVC compounds saw slightly higher price rises due to increases in additive costs.

Material remained very tight over the two months of April and May with several planned and unplanned plant outages taking place and a distinct lack of imports. Shin Etsu and Vynova joined Inovyn and Kem One in declaring force majeures as of early May. At the same time, demand was strong with particularly high order intake from the construction sector.

PET

PET prices continued to increase sharply in April despite a virtually unchanged cost base with bottle-grade contract prices rising by around €100/tonne. Several unplanned plant outages at PTA plants in Belgium and Poland curtailed feedstock availability while imports remained at very low levels.

COVID-19 lockdown measures and the cool weather reduced demand more than had been expected. In most cases, converters were able to avoid stoppages due to material shortages.

The steep rise in PET prices came to a halt in May with contract settlements declining on average by €15-20/tonne due to lower input prices, better availability and low demand. The supply position improved with the PTA bottlenecks gradually easing. At the same time, imports were being attracted by the high price level in Europe. Meanwhile, demand continued to disappoint due to the cold spring weather.