Prices mostly firm on persistent tight supply

In December, European standard thermoplastic prices mostly posted small price increases despite lower demand towards the end-of-year holiday period and limited cost development.
Tight supply remained a feature of most polymer classes in December.

The PVC market continues to exhibit very low supply, which supported further price increases for both rigid and flexible compounds, base material prices were stable in December.

Styrenics prices increased by just less than the €23/tonne rise in styrene monomer costs as weak demand offset the supply tightness.

L/LDPE and HDPE prices gained €20/tonne despite a €10/tonne reduction in the ethylene contract price, which mainly reflected low material availability.

For PP, a stable propylene cost settlement was followed by small gains for film grades with rollovers for homopolymer and copolymer injection moulding grades.

PET prices gained €40-50/tonne and may well have reached a peak in the current price cycle as a large volume of imported Asian material is expected to arrive during the first quarter.

Supply tight
Material availability remained tight during the final month of the year. Despite the supply constraints, producers were mostly able to meet contractual volumes during December. Imports of polymer remain quite low but this situation is likely to improve during the first quarter of the year.

The PVC, styrenics and PET sectors are particularly suffering from supply shortages as a result of production restrictions and low import volumes.

Several planned and unplanned plant outages were announced during December and January 2022;

• Total declared force majeure for polystyrene deliveries from the plant in Carling, France 20 December 2021 due to strike at Arkema, which is also located at the site. This meant that access roads to the plant were blocked
• Dow declared force majeure on all polyethylene grades on 17 December 2021 following the breakdown of two of the three crackers at Terneuzen in the Netherlands
• Ercros SA shut its VCM unit in Spain on 2 January for a planned 89-day maintenance programme
• Ineos declared force majeure for PP at its site in the UK on 7 December
• Versalis LDPE plant in Italy shut down for a 49-day planned maintenance programme 10 January
• Trinseo reduced operating rates at its GPPS and HIPS lines in Belgium for around two weeks in December as a result of feedstock shortages
• Borealis plans to shut down the 300,000 tonnes/year propylene facility in Belgium for maintenance late January

Vynova lifted the force majeure at its VCM line in the Netherlands 22 December

Seasonal demand lull
Seasonal demand levels dropped as usual in December, but in addition, the reimposition of coronavirus restrictions in many European countries and converters aiming to minimise stock levels for balance sheet reasons as year-end approached, further curbed polymer sales. Building and construction demand remained unusually good but there was continued weakness in the automotive sector.

January outlook
Styrenics prices are expected to soar following a triple-digit rise in the January styrene monomer reference price, while polyolefin producers are also likely to target higher prices despite a rollover for both ethylene and propylene contract prices. There is no sign of an end to the upturn in PVC prices.

Converters are also likely to face further upward price pressure as polymer producers seek to push through a surcharge for higher energy costs. Negotiations could involve the inclusion of a binding electricity price formula into customer contracts or a higher annually negotiated, fixed ‘conversion fee’ for the producer, in addition to the cost of the monomer.

L/LDPE
In December, European L/LDPE producers achieved price increases of €20/tonne in a tight market, despite a small reduction in feedstock costs. The ethylene contract price settled down by €10/tonne due to softening oil and naphtha costs.

Material availability remained on the low side but converters were generally able to obtain the volumes they required. Supply was further tightened by a force majeure being called at a cracker and polyethylene plant in the Netherlands in mid-December.

Demand was dampened by the reimposition of coronavirus restrictions in many European countries, the shortness of the production month and converters aiming to minimise stock levels for balance sheet reasons as year-end approached.

In January, while cost pressure has abated with a rollover for ethylene costs, producers are expected to push for further price increases to cover higher energy costs.

HDPE
At the beginning of December, HDPE producers announced planned price increases of €30/tonne to cover higher energy costs following a small reduction of €10/tonne in the ethylene contract price. In view of good demand, blown film and injection moulding grades registered gains of €25/tonne and €30/tonne, respectively. Blow moulding prices saw increases of €20/tonne as a result of weaker sales.

Overall, HDPE demand suffered from converters buying only the bare minimum and coronavirus restrictions being reintroduced. Blow moulding was also affected by continued poor performance of the automotive sector. Supply was however generally sufficient to meet converters’ demand.

In January, HDPE prices are expected to rise despite the rollover for ethylene costs. Producers are likely to call for higher prices to cover the rising cost of energy with the possible inclusion in contracts of an energy surcharge.

PP
At the beginning of December, PP producers attempted to raise prices to cover the higher costs of energy, although feedstock costs remained stable. Buyers successfully pushed back calls for higher prices and homopolymer and copolymer injection prices were largely rolled over. Homopolymer film grades saw price gains of €10-15/tonne.

Homopolymer film demand held up better than expected last month, yet demand for homopolymer and copolymer injection material was lower. Weakness in the automotive sector, the reimposition of restrictive measures to control the Omicron variant and converters minimising stock levels in the run-up to year-end, all contributed to restrain PP sales.

Supply returned to more normal levels in December with only a few minor PP plant outages reported.

In January, PP producers will again attempt to factor higher energy costs into price negotiations.

PS
The December styrene monomer (SM) reference price settled up €23/tonne as a result of higher benzene costs and production outages at several European facilities. Polystyrene producers were largely unable to pass through the full cost increase to converters as both GPPS and HIPS prices increased by €20/tonne, just less than the SM cost rise.

Styrene monomer and polystyrene remained in short supply in December. Imports from the US were scarce and there were several temporary plant shutdowns and force majeures called at cracker and polymer production plants during the month.

PS sales weakened last month as converters ordered just sufficient material to meet their immediate production needs and sought to minimise stock levels as year-end approached.

Polystyrene prices are expected to surge in January following the triple-digit increase of €119/tonne in the styrene monomer reference price.

PVC
In December, PVC producers settled for a price rollover for base material following a €10/tonne reduction in ethylene costs. Rigid and flexible PVC compounds however registered price increases of €30-40/tonne as a result of rising additive costs.

PVC base material and compounds still faced limited supply in December due to continued plant outages and low availability of imports.

Building and construction industry demand for PVC remained unusually high towards the end of the year while sales to the automotive sector weakened further.

PVC prices show no sign of softening for the foreseeable future due to tightening supply and a further increase in additive costs. A series of plant maintenance programmes are likely to curtail production during the first quarter of 2022. Planned price increases for plasticisers, titanium dioxide and other additives will push up PVC compound prices.

PET
The European PET market was becalmed in December with very low demand and tight supply. PET producers attempted to pass on higher feedstock and energy costs to converters but bottle-grade prices increases by only €40-50/tonne in very thin trading. The November paraxylene contract however, increased by just €10/tonne.

Material availability remains very low with European producers running plants at reduced operating rates in view of the weak demand. Imports from the Far East are however expected to increase substantially by during the first quarter.

The reimposition of restrictions to control coronavirus curtailed even further an already depressed low-season beverage bottle demand. Converters also sat back in anticipation of high volumes of Asian material arriving late January.

PET prices may be approaching a peak in the current cycle with continued low seasonal demand and higher expected import volumes.