European standard thermoplastic prices plummeted to multi-year lows in May as a result of lower upstream costs and weak demand. Polymer prices turned a corner in June following a rise in crude oil and feedstock costs.
However, demand was largely subdued and polymer producers successfully introduced measures to control supply by production cutbacks.
In May, L/LDPE producers limited price reductions to less than half of the €100/tonne fall in ethylene costs, with HDPE prices falling by slightly more. By mid-June, however, both L/LDPE and HDPE producers had passed on €40-50/tonne of the €60/tonne rise in the June ethylene contract price.
PP producers had to pass on most of the €80/tonne reduction in the propylene May contract price to buyers. By mid-June, PP buyers resisted paying the full monomer hike of €60/tonne with settlements ranging from €40-50/tonne.
PS prices stabilised in May and had increased by slightly less than the €64/tonne rise in styrene monomer costs by mid-June. PVC producers passed on in full the €50/tonne impact on their cost base of the €100/tonne reduction in ethylene costs in May.
By mid-June, PVC prices had increased by €30/tonne compared with a €60/tonne rise in ethylene costs. May PET deals were closed with decreases of €30/tonne, which was slightly more than the proportionate impact of a lower cost base before stabilising by mid-June.
Demand started to pick up in May as several European countries eased the lockdown restrictions, but varied widely between sectors. Food and hygiene packaging markets continued to perform well, but polymer demand remained well below normal for industrial, construction and automotive markets. Many large-scale converters took advantage of the low prices on offer to top up inventories. With many large-scale converters sitting on comfortable stocks due to their earlier pre-buying activities, demand was below normal up to mid-June.
Nevertheless, there appears to have been an upturn in consumer spending on non-essential items such as houseware products and an increase in construction activity. The automotive industry, meanwhile, remained subdued.
In May, material availability tightened as producers initiated strict production controls. Several planned and unplanned plant outages also restricted output.
- Versalis shut its 490,000 tonnes/year steam cracker in Brindisi, Italy for a planned maintenance mid-May.
- Qatar Petrochemical Company declared force majeure on its deliveries after a production line in Qatar was unexpectedly shut down on 3 May. Qapco operates LLDPE production through Qatofin, a joint venture it has along with Total and state-owned Qatar Petroleum.
- As a consequence of the fire at Borealis’ cracker in Stenungsund, Sweden on 9 May, the polyolefins producer declared force majeure on cracker activities at the site.
Earlier, Kem One lifted the force majeure on PVC production from its plant in Saint-Fons, France 30 April. The company had declared the force majeure as a result of the interrupted navigation on Rhone River back in February.
Supply remained well balanced in June as producers maintained tight production controls. HDPE and LLDPE imports declined compared to previous month as Asian markets became more attractive to exporters.
Standard thermoplastic prices may sustain firming in July driven by the rising upstream markets. OPEC and its allies extended oil cuts, which have pushed crude oil prices above the $40/barrel mark. Demand can reasonably be expected to grow later in the month and into July in anticipation of further price increases. Meanwhile, production controls remain to control polymer supply.