Polyolefins yield to lower costs and weak demand

In March, polyolefin prices more or less mirrored the rise in ethylene and propylene costs, although the rise did not always match the increase in monomer. LDPE prices increased by just €10/tonne compared to the €30/tonne rise in ethylene costs largely because of weak demand. LLDPE prices, on the other hand, increased in line with the monomer cost rise because of reduced availability. HDPE prices increased by just less than the €30/tonne rise in the ethylene reference price. PP producers attempted to pass on the €30/tonne increase in propylene costs but their efforts were largely unsuccessful with deals also settling on average at just less than the increase in monomer.
PVC producers attempted to factor in the proportionate €15/tonne rise in the cost of ethylene. Base PVC prices, in most cases, were however rolled over from the previous month because of ongoing demand weakness. Polystyrene prices fell by €80-90/tonne, which was less than the €113/tonne reduction for the styrene monomer reference price. Bottle-grade PET prices began to stabilise and were largely unchanged from the previous month.
In April, polyolefin prices turned downward following a decline of €40/tonne for both the C2 and C3 contract prices. Base PVC prices fell by more than the proportionate €20/tonne impact of the lower ethylene on the PVC cost base because of ongoing demand weakness. Polystyrene prices increased on average by €10/tonne following a rise of €19/tonne for the styrene monomer reference price. PET prices firmed slightly because of higher import prices and an upturn in seasonal demand.

Supply adequate
There was sufficient material available across all polymer classes to meet demand during the last two months despite production curbs and a series of planned and unplanned plant outages.
A summary of selected production issues for European polymer plants are summarised below.

• The LyondellBasell cracker at Berne, France was shut down 3rd April due to a fire
• The Ineos PP plant at Lavera, France was taken offline 6th April and force majeure was declared due to strikes. The plant was restarted as of 13th April while force majeure remained in place
• Kem One declared force majeure on PVC output from Balan, France on 23rd March due to VCM issues stemming from strikes. Force majeure was lifted on 14th April
• Borealis shut down PP production plants in Belgium on 28th March with restart to be announced
• Repsol Quimica shut down its styrene plant in Spain on 30th March with restart to be announced
• TotalEnergies declared force majeure on 20th March for polystyrene, citing supply restrictions due to the escalating nationwide strikes.

Demand low
Demand remained below what would normally be expected at the time of year throughout the last two months. In March, converters bought just sufficient material to meet their immediate production needs as prices were expected to fall in April. The Easter break also put a dampener on demand in early April. There has however been a small upturn in seasonal demand during April across the agricultural, building and beverage sectors.

May outlook
At the time of writing (mid-April) crude oil prices and spot monomer prices are rising, which could lead to higher monomer cost settlements in May. With the pressure from rising costs, polymer producers are likely to press for higher prices. Whether or not they can successfully pass through the higher costs will depend largely on demand. Perhaps, the low buying appetite in several end user markets will keep the volumes of demand at modest levels.In March, polyolefin prices more or less mirrored the rise in ethylene and propylene costs,

L/LDPE
In March, LDPE producers were largely unbale to pass on the €30/tonne increase in ethylene costs because of low demand and adequate availability. LLDPE prices, on the other hand, increased in line with the cost rise; mainly because lower imports had curtailed supply.
Demand for packaging increased at a modest rate in March but still failed to reach a level that would normally be expected. Supply was kept in check by scheduled and unscheduled production outages as well as lower imports; yet apart from a few specialty products, there adequate availability to meet demand.
L/LDPE prices came under pressure during the first two weeks of April because of lower monomer costs (down €40/tonne) and weak demand. LDPE prices fell in line with the cost reduction while LLDPE prices slipped by only €20/tonne on tighter availability.

HDPE
In March, HDPE prices increased by just less than the €30/tonne rise in the ethylene reference price although there was very wide variations in price settlements.
Demand remained below what would normally be expected for the time of year, but there was a slight upturn in seasonal demand from the agricultural sector. Producers maintained strict production controls to restrict availability while import volumes declined. There was however still enough material around to meet the low level of demand.
HDPE prices were around €30/tonne lower during the first half of April compared to the €40/tonne ethylene cost reduction. Supply was tight but there was still sufficient material to satisfy demand. There was very limited evidence of any significant recovery in demand. Converters may well push for bigger price discounts during the second half of the month.

PP
PP sellers attempted to pass on the €30/tonne rise in propylene costs onto buyers in April. Their attempts to raise prices in line with costs largely failed; settlements varied widely but increased on average by just less than the cost rise.
Material availability remained low because of production outages and fewer imports from the Middle East. Demand continued to disappoint and converters bought just sufficient material to meet their immediate production needs as prices were expected to fall in April.
In April, PP producers initially planned for a price rollover, but the €40/tonne reduction for the propylene reference price and fragile demand forced sellers to pass on the full cost reduction to converters. There was sufficient material available to meet demand despite production cutbacks. Converters were only ordering enough material to meet their immediate production needs.

PVC
In March, PVC producers attempted to factor in the proportionate €15/tonne rise in the ethylene contract price into their price negotiations. Base PVC prices were in most cases rolled over from the previous month because of ongoing demand weakness. PVC compound prices dropped by €10/tonne because of lower additive costs.
Demand remained below expectations although there was a small increase in seasonal building sector sales. Production was limited because of disruption caused by plant outages and stoppages due to the strikes in France, yet supply was adequate to satisfy demand.
PVC prices slipped by €30/tonne during the first half of April, which was more than the proportionate fall in the cost of ethylene (down €20/tonne). Further price rebates cannot be ruled out over the rest of the month. Supply is more than adequate while demand remains weak.

PS
Polystyrene prices fell sharply in March following the €113/tonne reduction in the styrene monomer reference price. PS producers managed to keep the price discount to less than the cost reduction with average settlements down by €80-90/tonne.
There was more than enough material available to meet demand despite lower producer inventories. Demand remained below what would normally be expected at this time of year, although thee was an upturn in seasonal ordering.
General-purpose PS price settlements varied widely in early April. Some deals settled on a rollover basis while others concluded with price increases matching the full €19/tonne rise in  the styrene monomer cost. There was more than enough material available to meet demand, despite production cutbacks and a force majeure being called at TotalEnergies’ plant in France. The Easter holidays further dampened the persistently thin demand.

PET
PET buyers were able to gain discounts of €40-50/tonne in early March but the market tightened as the month progressed. Paraxylene costs fell by less than anticipated (down €20/tonne) and Chinese imports became more expensive. Consequently, European PET prices began to stabilise and largely remained unchanged from the previous month.
Material availability improved slightly as production cutbacks were eased. Demand still remained below normal for the time of year despite an upturn in seasonal demand.
In April, bottle-grade PET prices are firming slightly because of higher import prices and higher demand. The European Commission has initiated an antidumping investigation on PET imports from China and regional buyers have been avoiding this origin as antidumping duty will be applicable on en-route cargos as well. Meanwhile, buying activity has improved in line with a normal seasonal demand upturn.