Polymer prices soar on higher feedstock and energy costs

After trending downward from their peak levels since May, European standard thermoplastic prices are now climbing sharply once again with a moderate rise in October and an acceleration in November. Indeed, PVC, PP and HDPE pipe grade prices have hit all-time highs. Supply shortages, rising feedstock and energy costs and logistics bottlenecks are the main price drivers.

The unprecedented surge in energy costs has rattled regional polymer markets. Several producers announced their plans to implement an energy surcharge on their prices, addressing the sudden and abrupt hikes in natural gas and electricity prices leading to a significant erosion of margins.

Base PVC resin prices have increased by a combined total of €190/tonne during the last two months compared to a proportionate rise in ethylene costs of €108/tonne. PVC supply remains very tight while demand is holding up well.

PP prices have increased around €200/tonne since the beginning of October against an increase of €120/tonne in propylene costs.

LLDPE prices have increased by far less than the rise in ethylene costs since early October on improving availability. LDPE prices have risen in line with ethylene on shorter supply. HDPE blow moulding prices have also increased by far less than ethylene costs on better availability and lower demand.

General-purpose polystyrene prices skyrocketed by €250-300/tonne in November following a €232/tonne surge in styrene monomer costs. The price rise includes a surcharge to cover higher energy costs.

PET prices have also skyrocketed, recording triple-digit increases in each of the last two months as a result of tightening availability, soaring energy and upstream costs and a lack of Asian imports.

Supply variable

For PVC and PS, the supply position remains very tight due to several planned and unplanned plant turnarounds. For LLDPE, the supply situation has improved, but remains short for LDPE. Higher import volumes from the US and the Middle East, however, has helped to raise PE availability. HDPE supply is also low, but there was sufficient material available to meet demand. The PET sector has tightened considerably due to plant outages, lower supply and a lack of Asian imports. PP supply varied widely between producers.

A summary of the latest plant outages is shown below;

• Inovyn declared force majeure on PVC production at its German plant on 17^th September
• Versalis called force majeure for PS at Mantua, Italy on 15th September due to a fire, which the company said would likely affect production for at least a month
• Vynova shut down its PVC plant in Germany for a maintenance turnaround on 1^st October for 25 days
• Borealis declared force majeure at its cracker at Stenungsund, Sweden on 14th September following a fire for an indefinite period. Polyethylene production at the site was also restricted
• JBF-RAK and Equipolymers planned to shut their PET plants between September and November.

Demand

PVC demand, particularly from the construction sector, remained good, while PS demand was also quite solid. PE demand was in line with seasonal expectations with PP orders slightly lower than would normally be expected. PET demand was also restrained, commensurate with the low season.

December outlook

While forecasts of polymer price development are extremely uncertain at present, the likelihood is for further but smaller price increases before the year end. The supply position seems unlikely to get better any time soon. Demand is also likely to soften with prices at such high levels, and as converters gradual slowdown production in the run-up to Christmas.

While forecasts of polymer price development are extremely uncertain at present, the likelihood is for further but smaller price increases before the year end. The supply position seems unlikely to get better any time soon. Demand is also likely to soften with prices at such high levels, and as converters gradual slowdown production in the run-up to Christmas.

L/LDPE

In October, the ethylene contract price once again turned upward, driven by surging oil and liquid natural gas prices. The month began with slightly softer notations but rising energy costs led to an upturn in L/LDPE contract price settlements. Over the month as a whole, LDPE prices increased €15/tonne with LLDPE prices up by €20/tonne.

The local supply situation remained very tight in October but material availability was eased somewhat by imports from the Middle East and the US. Demand started to slow down as many converters had been buying additional material over the previous two months to avoid rising prices,

LDPE prices leapt €100/tonne by mid-November from October while LLDPE prices were up by €70-80/tonne following a €92.5/tonne rise in the ethylene contract price. LDPE supply remains tight but the LLDPE supply position has improved.

HDPE

In October, sellers approached the market with offers varying between €25-60/tonne following a rise of €25/tonne in the ethylene contract price and surging energy prices. However, buyers were not prepared to absorb price increases far beyond the ethylene cost settlement. Blow moulding prices were largely rolled over, blown film prices increased €5/tonne and injection moulding grades increased €30/tonne.

Most European plants were operating as normal and material availability was adequate to meet demand. The construction sector continued to order at a high rate, whereas demand was normal from most other sectors.

HDPE producers had rarely succeeded in raising prices by the targeted €120/tonne by mid-November. Blow moulding prices had risen by €60/tonne from October with blown film and injection moulding prices up €90/tonne. Material availability remains low but there is sufficient material to meet contract commitments.

PP

In October, PP producers sought to raise prices following a €25/tonne increase in the propylene contract price. However, good local supply and cheaper imports kept a lid on planned price hikes. Homopolymer injection and copolymer injection prices increased €20/tonne with homopolymer film prices remaining flat at the September level. Suppliers started to draft plans to implement energy surcharges by the end of the month.

With only a few exceptions, supply was more than sufficient to meet demand. Although packaging sectors continue to perform well, demand from other sectors including automotive and household items has cooled.

In November, producers initially targeted a €150/tonne price increase to cover the €95/tonne rise in propylene costs and a surcharge for higher energy costs. By mid-month, PP prices had increased €90-100/tonne from October. Demand was low and material availability was improving.

PS

PS producers initially called for price hikes of €55/tonne at the beginning of October in a bid to protect their margins as a result of rising energy and feedstock costs. Prevailing market dynamics, however, meant that such increases could not be implemented. General-purpose and high-impact polystyrene prices increased by €30/tonne, slightly higher than the €23/tonne rise in the styrene monomer reference price.

With most plants returning back to full operations following outages, there was sufficient material available. Demand was normal, but consumer goods sector order intake was quite restrained.

Following a surge of €232/tonne in the styrene monomer reference price and rising energy costs, PS producers called for massive price rises in November. By mid-month, general-purpose PS prices had soared by €250-300/tonne from October. Demand held up well while supply tightened following a plant outage.

PVC

In October, PVC prices continued to reach new all-time highs with gains in excess of the proportionate (€12.5/tonne) ethylene cost increase. PVC base material prices increased by €55/tonne; flexible PVC compound prices increased by €90/tonne with rigid PVC compounds up by €90/tonne. Material tightness remains the key price driver, along with lively demand and rising energy and additive costs.

Supply shortages persisted due to plant maintenance turnarounds and a shortage of imported material. The construction industry continued to be the main demand driver while export markets also performed well.

In November, PVC producers approached the market with planned price hikes ranging between €130-160/tonne from October. November hikes went well beyond the impact on the PVC cost base from the proportionate €46/tonne ethylene cost increase. The three-digit price increase achieved includes an energy cost surcharge.

PET

The European PET market began October relatively calm, but turned rather more frantic midway through the month. It then became apparent that energy and raw material costs were skyrocketing while supply restrictions had also led to very tight material availability. Producers reacted by calling for price increases of €300/tonne. By end-month, however, contract prices had increased by €160-170/tonne.

Supply was hampered by production restrictions at PTA plants in Lithuania and Poland,  maintenance work at several PET facilities, and a very limited volume of imported Asian material. Demand was still restrained, in line with the low season.

In November, PET prices soared once again with triple-digit hikes from October on the back of tightening availability, soaring energy and upstream costs and a lack of Asian imports. Several producers also decided to apply energy surcharges to their prices.