Prices plunge on weak demand and lower feedstock costs

Lower feedstock costs and disappointing demand pushed European standard thermoplastic prices further downward across the board last month.

Polyolefin prices fell by considerably more than the reduction in raw material costs. L/LDPE prices fell by €120/tonne compared to the €70/tonne fall in the August ethylene cost settlement. HDPE prices fell by slightly more on wider material availability. PP prices fell between €100-120/tonne against a reduction of €85/tonne for the propylene contract price.

The base PVC prices reduction also exceeded the proportionate impact of lower ethylene costs with notations tumbling by €65-70/tonne. PVC flexible and PVC rigid compound prices fell by slightly less than base PVC prices as a result of lower additive costs.
The styrene monomer reference price plummeted by a monthly record of €509/tonne in August and this resulted in PS price settlements down between €450-500/tonne. PET prices also slumped up to €200/tonne due to lower costs, abundant supply and disappointing sales.

Demand low
Demand was much lower than would normally be expected during the summer holiday period across all material classes. Fear of recession and high price levels meant that most converters purchased just sufficient material to cover their immediate production needs. The automotive and building & construction sectors were especially reluctant to buy.

Supply adequate
Supply was ample to meet the low demand across all product sectors in August despite production cutbacks and plant outrages. Converters were also able to purchase a growing volume of competitively-priced PE, PP, PVC and PET imports from Asia and the Middle East as freight rates eased.
Reports of producers shutting down facilities due to the high costs in Europe are on the rise. These include Dow Chemical, and a similar approach has reportedly been taken by SABIC for its European PP homopolymers production, with demand instead being met with imports. Polynt, the specialty polymers and intermediates producer, announced 4 September that it was to shut down its Italian lines to get a handle on the costs being caused by the high energy prices.
Vynova, Europe’s third largest PVC producer, has begun reducing output due to high gas prices and weak demand. All three of the company’s PVC lines in the Netherlands, Germany, and France – and possibly the backward-integrated VCM lines – are affected by the change.

September trend
In September, resin producers made it clear that they want to retain part of the decreased feedstock cost. Whether or not they succeed remains to be seen.
LyondellBasell has announced an energy surcharge for LDPE, HDPE, and PP in September, amounting, for now, to €160/tonne. Other polyolefin producers plan to retain at least part of the drop in raw materials costs for PE and PP – currently between €40-80/tonne – either within the total or, as with LyondellBasell, by way of an energy surcharge. The ethylene and propylene contracts fell by €120/tonne and €165/tonne, respectively, in September.
L/LDPE, HDPE and PP are falling by less than the reduction in feedstock costs during the first two weeks of September due to production cutbacks by producers and weak demand. PVC prices continue to fall as competitively-priced imports and low demand pile further downward pressure on European producers.
PS prices have fallen on average by around €255/tonne following a sharp reduction in both the benzene and ethylene contract prices. PET prices are trading lower following a decline in feedstock costs, low demand and the ongoing pressure from imports. Elevated utility costs may however check possible PET drops.

LLDPE
In August, LDPE and LLDPE prices both fell by €120/tonne, which was significantly more than the 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. 
Demand was lower than would normally be expected during a summer holiday period amid growing economic uncertainty and the squeeze on consumer purchasing power. Converters mostly tended to work from stocks and purchase only to meet their immediate production needs.
While there was sufficient material available to meet the slack demand, production cutbacks and maintenance turnarounds kept a lid on supply. Imports from the Middle East and Asia were also widely available.
Prices are falling in September, although less than expected as producers’ factor in rising energy costs. The September ethylene contract price settled €120/tonne lower.

HDPE
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 €120-130/tonne compared to the previous month.
HDPE production has been cut back by less than other PE materials and a good local supply was supplemented by a steady stream of imported material.
Demand was far less than would normally be expected during the summer. The automotive and building & construction sectors, were in particular, reluctant to buy amid growing fear of recession.
In September, HDPE prices are falling by less than was originally expected. Producers appear to have retained a proportion of the €120/tonne reduction in ethylene cost to compensate for rising energy prices. European HDPE producers have stepped up production cutbacks, but supply is supplemented by a steady stream of imported material.

PP
PP prices also fell much further than the €85/tonne reduction for the propylene reference price in August due to weak demand and abundant supply. Homopolymer injection moulding and homopolymer film prices fell by €120/tonne and copolymer injection prices were €100/tonne lower.
Demand has slowed down noticeably over the summer as converters become more wary of the likely impact of a recession.
There was more than sufficient ,material available to the European market despite production cutbacks and production outages. There was also a plentiful choice of lower-priced imp[orts.
PP prices fell further during the first two weeks of September after the propylene reference price settled €165/tonne lower. Demand shows no sign of a recovery amid growing fear of a recession. While producers have made further production cutbacks to prevent a build-up of stocks, availability remains well supported by imports.

PVC
In August, base PVC prices fell by around €65-70/tonne, which far exceeded the proportionate €35/tonne reduction in PVC production costs from the €70/tonne fall in the cost of ethylene. PVC flexible and rigid compound prices fell by slightly less than base PVC prices as a result of lower additive costs.
Market demand was lower than would normally be expected during the summer as fear of a recession grew. Converters bought just enough material to cover their immediate production needs.
While compounders reduced production in response to the low demand, there was more than enough material available from local producers and from imports.
PVC base resin and PVC compound prices fell again during the first half of September. High stocks at producers, competitively-priced imports and low demand are piling further downward pressure on European PVC prices. 

PS
The styrene monomer reference price plummeted by a record €509/tonne in August, largely the result of a crash in benzene. Producers initially targeted a price rebate of €400/tonne, but very weak demand meant that producers had to concede rebates of €450-500/tonne.
PS demand was weaker than would normally be expected during the summer. The wide price differential between PS and PP continues to encourage material substitution while the fear of recession grows.
PS producers have implemented production cutbacks in view of the weak demand while import volumes remain quite low.
PS prices have again fallen sharply during the first two weeks of September after benzene and ethylene contract prices settled much lower. Material availability remains under control with production cuts in place and imports remaining low. There were few signs of a significant upturn in demand by mid-month.

PET
In August, PET buyers were looking for price relief following a reduction of €95/tonne to the July paraxylene and MEG contract prices. Accordingly, PET prices slumped by up to €200/tonne due to an abundant supply and disappointing sales.
PET demand remained rather sluggish last month despite the hot summer weather and drought conditions in many parts of Europe. Converters preferred to draw down stocks in anticipation of further sharp price rebates.
Supply was more than sufficient to meet the low demand, despite production cutbacks. There was also a growing volume of very competitively-priced imports from Asia and the Middle East due to an easing in freight costs.
PET prices are falling further in September following a decline in feedstock costs, low demand and the ongoing pressure from imports. Elevated utility costs may however check the PET price reduction.