Polyolefins pressured by weak demand and rising supply

In July, the price development for European standard thermoplastics varied widely between the different material classes. Polyolefin and PVC prices faster than feedstock costs, polystyrene prices surged following a hike in the cost of styrene monomer and PET prices also increased amid paraxylene shortages.

L/LDPE and HDPE prices fell by more than the €100/tonne decline in the C2 costs due to weak demand and rising import volumes. The propylene reference price settled down by €120/tonne as a result of falling naphtha costs. PP price tumbled much more than the cost reduction due to low sales and over-supply.

PVC prices dropped for the third month in a row due to rising supply and slower demand with decreases in excess of the pro-rata €50/tonne drop in ethylene costs.

PS prices increased in line with the €155/tonne increase in the styrene monomer reference price, which settled at an all-time high of €2,340/tonne.

The European PET market is going through turbulent times as a result of paraxylene feedstock shortages. Following an increase of €305/tonne to a record high level for the July PX reference price, producers settled for a PET price rise of €100/tonne in view of good availability supplemented by imports, and hesitant demand.

Supply adequate

Supply was more than adequate to fulfil contractual obligations across all product sectors in July. While most polymer plants were running without interruption and producers, for the most part, kept a lid on production rates, local supply was supplemented by a growing volume of imports from Asia and the Middle East. The PP sector was particularly well supplied. Some PET producers were forced to curb production or even to temporarily shut down plants due to paraxylene shortages.

A summary of the latest supply-related developments are summarised below.

• Trinseo shut down its 300 ktonne/year styrenics facility in Germany for maintenance 1 August
• Serbian polyolefin producer HIP Petrohemija declared force majeure for all products from its plant in Pancevo in Serbia 28 July
• LyondellBasell declared force majeure for a steam cracker in Berre, France following a 2  August fire
• JBF Industries declared force majeure on feedstocks for its PET plant in Geel, Belgium on 20 July. The company has also taken its PET plant offline in the same location
• BorsodChem announced maintenance shutdowns for PVC and PS at its plant in Hungary on 20 July.

Demand weak

Demand was mixed between polymer classes in July. Polyolefin sales from consumer markets were low as a result of the usual summer holiday lull and converters drawing down stocks in view of the high price levels. For PVC, demand was more subdued than is usual for the summer holiday period with shrinking sales to the building and construction sector and continued weakness in the automotive industry. For PS, many buyers held back from making purchases because a sharp downward price correction was anticipated for August.

PET demand is rising on the back of the holiday season, the heatwave, and a lack of glass bottles and beverage cans.

August trend

PE and PP prices fell by significantly more than the declines of €70/tonne for ethylene and €85/tonne for propylene costs. The €50/tonne fall in base PVC prices also exceeded the pro-rata 50% reduction in C2 costs. The styrene monomer reference price plunged by a record €509/tonne and  PS prices responded with a decline of €500/tonne. PET buyers are looking for some price relief following a reduction in feedstock costs.

L/LDPE
Lower crude oil and naphtha costs led to a drop of €100/tonne for the July ethylene contract price settlement. L/LDPE prices fell by an even larger amount (down €160/tonne) as a result of weak demand and rising import volumes.

There was more than sufficient material available despite maintenance turnarounds and production cutbacks. There was also a significant volume of lower-priced ‘special offers’ and off-spec material available. Imports from the Middle East and Asia supplemented local production.

Demand from consumer markets was low as a result of the usual summer holiday lull and converters drawing down stocks.

In August, LLDPE prices fell by €120/tonne while LDPE prices were €100/tonne lower following a decline of €70/tonne in the cost of ethylene. Material continued to be well supplied while demand from various end use sectors continued to disappoint.  

HDPE
HDPE prices dropped by more than the €100/tonne reduction in the ethylene contract price settlement in July as a result of very low demand and a rising volume of imports. Blow moulding and injection moulding prices fell by €160/tonne while the price for blown film types dropped by €140/tonne.

There was more than sufficient material available to European buyers as most plants were running smoothly and supply was swelled by imports from Asia and the Middle East.

Demand for blow moulding types suffered due to the continued weakness in the automotive sector. Many converters worked from stock rather than buy additional material as prices were expected to fall further.

In August, HDPE price reductions once again far exceeded the €70/tonne decline in the ethylene reference price with settlements for all types down by €130/tonne compared to the previous month.

PP
In July, the propylene reference price settled down by €120/tonne as a result of falling naphtha costs. PP prices tumbled by more than the reduction in the cost base due to weak demand and rising imports. PP homopolymer injection and copolymer injection prices declined by €190/tonne with homopolymer film prices down by €160/tonne.

Material availability was plentiful with most production plants running without disruption. Material availability was also swollen by a growing volume of imports from the middle East and Asia. Meanwhile, demand was low across all major market sectors due to the economic slowdown and plant closures during the summer holidays.

PP prices also fell much further than the €85/tonne reduction for the propylene reference price in August. Homopolymer injection moulding and homopolymer film prices fell by €120/tonne and copolymer injection prices were €100/tonne lower.

PVC
In July, European PVC prices dropped for the third month in a row due to rising supply and slower demand. Price decreases this time were well in excess of the pro-rata €50/tonne drop in ethylene costs. Base PVC prices fell by €80/tonne with rigid PVC compounds down by €60/tonne and flexible PVC compound prices down by €50/tonne.

Despite growing worries about the rising cost of energy on PVC production, the overall supply situation was more than comfortable amid a lack of major production issues in Europe and a growing volume of imported material.

Demand was more subdued than is usual for the summer holiday period with shrinking sales to the building and construction sector and continued weakness in the automotive industry.

In August, base PVC prices fell by around €50/tonne on continued good material availability and weak demand.

PS
In July, the styrene monomer reference price settled at an all-time high, up €155/tonne to €2,340/tonne, driven by higher benzene and energy costs. Producers took a mixed approach to pricing policy; some producers raised PS prices by more than the SM cost while others chose to restrict margins in order to boost demand.

Producers kept a lid on production with material availability supplemented by imports from the Middle East. Demand, however, remained very low due to the record price levels and fears of recession. Many buyers held back from making purchases because a sharp downward price correction was anticipated for August.

The SM reference price duly plummeted by €509/tonne in August, largely the result of a crash in benzene. Producers initially targeted a price rebate of €400/tonne but low demand and good material availability pushed settlements down by up to €500/tonne.

PET
The European PET market is going through turbulent times due to feedstock shortages. Paraxylene (PX), the key PET feedstock is short, mainly due to plant outages in the Middle East, which has restricted imports to Europe.

After protracted price negotiations, the July PX contract price finally settled in a spilt decision, rising  €305/tonne to a record high of €1,545/tonne. In view of good availability supplemented by imports and hesitant demand, producers were willing to accept a PET price increase of €100/tonne.

Supply was adequate to meet normal levels of seasonal demand despite producers keeping a lid on production and the shortage of paraxylene.

In August, PET buyers are looking for some price relief following a reduction of €95/tonne for the paraxylene contract price and a fall of €85/tonne for the monoethylene glycol (MEG) contract price.