Polymer prices February: Subdued sales restrict planned price hikes

In January, polyethylene and polypropylene prices rolled over following unchanged feedstock costs and weak demand. Similarly, PVC and PET prices remained unmoved at the start of the year.

High-density polyethylene, in contrast, registered significant price increases, despite flat feedstock costs and better availability. Seemingly, converters had run down stocks to such an extent that they were forced to pay higher prices to cover their immediate production needs.

The January styrene monomer reference cost surged €119/tonne due to a spike in the cost of benzene. PS producers managed to push through price increases well in excess of the cost increase.

In February, polyethylene prices increased less than the €67.5/tonne rise in feedstock costs. L/LDPE prices increased €30-35/tonne, HDPE prices €20-30/tonne with injection moulding grades remaining unchanged. Polypropylene price increases also lagged behind the €67/tonne rise in propylene costs. PVC prices, which had remained flat for the previous two months, increased in line with the proportionate ethylene cost rise in February.

Polystyrene prices declined by more than the €51/tonne decrease in the cost of styrene monomer due to a slight easing in energy 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 remain 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.

Some of the latest plant outages are summarised below.

• It was reported 22^nd February that the smaller of LyondellBasell’s two crackers in Wesseling, Germany had been down for several days
• Sabic reportedly had production problems with PP homopolymer in Gelsenkirchen, Germany on 14^th February and the plant had to be temporarily shut down
• Total Energies declared force majeure on polypropylene copolymer from its domestic facility in Gonfreville on 8^th February due to technical problems and a stoppage at a production plant
• Strikes halted operations at four of the five French locations of PVC manufacturer Kem One on 2^nd February and they were unable to deliver any products
• BP shut down its ethylene cracker in Germany for maintenance on 10^th January
• Vynova announced a partial turnaround for maintenance at its Belgium VCM plant from 1^st March to 1^st April
• Kem One shut down production of paste PVC (E-PVC) at its plant in Hernani, Spain mid-January due to a technical malfunction.

Demand low

Demand was slow at the beginning of the year due to high stock levels at converters and extended bank holidays. While February has seen an uptick in order activity, demand remains lower than normal. Converters bought on a needs only basis as they were sitting on ample stocks and refrained from buying additional material with prices at such high levels. Construction was the liveliest sector while automotive demand remained weak.

March outlook

For March, the polymer price outlook is uncertain. On the one hand, crude oil prices continue to climb amid uncertainty over the invasion of Ukraine by Russia. Hence, petrochemical feedstock costs are expected to rise. Polymer producers will target full recovery of material and energy cost increases, but will face strong buyer resistance.

Polymer demand is likely to pick up further in March as Covid restrictions are gradually eased and end user demand recovers. On the other hand, higher imports should increase supply.

L/LDPE

L/LDPE prices remained unchanged in January following a rollover for the ethylene contract price and low demand. In February, the cost of ethylene increased by €67.5/tonne due to an upturn in crude oil prices. Producers failed in their attempts to pass on the full cost increase to converters as a result of high stock levels and lower production levels due to Covid-related restrictions.

Demand was fairly tepid at the start of the year due to bank holidays and plentiful stock levels at converters. While February has seen an uptick in order activity, demand remains lower than normal.

LDPE supply has improved with a growing volume of imported material, but LLDPE supply remains tight. L/LDPE film orders are largely being fulfilled, but only because of the low demand. Injection moulding grades, however, were in short supply.

HDPE

HDPE producers surprisingly managed to push through price increases in January despite a rollover for the ethylene contract price. Seemingly, many converters had run down stocks to such an extent that they had to buy at higher prices and producers were able to recoup much of the energy cost increases.

In February, producers' attempts to pass through higher ethylene costs in full were largely unsuccessful. They had to settle for price increases of €20-30/tonne for blow moulding and blown film grades while injection moulding prices remained unchanged.

The supply situation has improved given the larger volume of imports now available to European buyers. However, the availability of certain specialty blow moulding grades remained quite limited.

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

PP

PP prices rolled over in January in line with the propylene contract price settlement. In February, the propylene contract price increased by €67/tonne. Initially, sellers attempted to pass through the cost increase in full, but buyers were unimpressed and strongly resisted such significant price hikes. PP producers were forced to revise their offer downward and by mid-month PP prices had risen by only €20-30/tonne.

Material availability has lengthened over the previous two months 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 are being fulfilled.

Demand was quite low at the beginning of the year with most converters buying only what they immediately needed. Orders picked up in February, particularly for film and injection moulding grades. Automotive sector sales remain subdued.

PS

In January, PS prices increased sharply after the styrene monomer reference price settled €119/tonne higher. Styrene monomer prices surged on the back of the soaring cost of benzene and production outages. PS producers were not only able to raise prices to cover higher feedstock costs, but also passed on higher energy costs.

A fall of €51/tonne in styrene monomer 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.

While two PS plants returned to production after outages and some producers reported no delivery issues, others experienced material shortages.

Demand picked up slightly in February after a slow start to the year. Converters are sitting on ample stocks and refrained from buying additional material given such high prices.

PVC

Base PVC prices were unchanged in December and January after a rising trend of eighteen months from June 2020. In February, the upward trend resumed with PVC producers able to factor approximately half of the €67.5/tonne rise in ethylene costs into the base PVC price rise. PVC compound prices have increased in each of the last two months as a result of higher plasticiser and other additive costs.

While material availability has improved somewhat, supply remains tight despite the lifting of force majeures and returning capacities. There is insufficient imported material arriving from the US and Asia while strikes have halted production at four PVC sites in France.

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

PET

In January, bottle-grade PET prices were mostly settled on a rollover basis, despite a €45/tonne rise in the paraxylene contract price. Initial planned price increases proved to be unrealistic as buyers resisted paying higher prices, pointing to the low season demand and already inflated prices.

Production levels have improved but producers’ stocks are still on the low side. Also, a higher volume of competitively-priced imports from the Far East arrived at the end of January and are now available for delivery to converters.

Higher production rates and rising imports have fed an expectation of falling prices. Hence, converters are not pre-ordering for the season as usual, but rather are buying on a need sonly basis.

PET prices have softened in February with only moderate cost pressure, improving material availability and with buyers in no rush to supplement their inventories.