The European standard thermoplastics market entered an unprecedented period of turbulence from mid-March. Not only has the OPEC dispute with Russia led to a dramatic fall in world crude oil prices, but the Covid-19 pandemic has caused considerable supply chain and logistics disruption.
On the upside, coronavirus-driven consumer demand has boosted sales of food, drinks and hygiene product packaging.
In March, standard thermoplastic prices were driven primarily by a downward shift in feedstock costs. Virtually all polymer products registered price discounts less than the feedstock cost reductions. Prices were supported by much stronger consumer demand for packaged food and drinks as a result of the Covid-19 pandemic and lower Asian imports into Europe.
April feedstock contract price settlements fully reflected the collapse in crude oil prices and the deteriorating prospects for European polymer demand due to coronavirus. The styrenics sector registered the most alarming cost decline. The styrene monomer reference price settled down €315/tonne, mostly as a result of the record €424/tonne fall in benzene costs.
The ethylene contract price was fixed €200/tonne lower while propylene saw a downturn of €175/tonne. Polymer producers approached the market with offers that were far less than the cost reductions would imply to protect profit margins. While most producers were unsuccessful in limiting rebates to their target level, they nevertheless managed to retain a large share of the cost reduction.
Material availability was good across all polymer classes in March and April with most plants running without interruption. However, the combined consequences of the coronavirus pandemic and the Easter holidays caused logistics problems and delivery delays.
Specific supply-related developments since late February include:
• ExxonMobil Chemical restarted its 830,000 tonnes/year ethylene plant at Mossmorran, Scotland late February. It has returned to the market after a shutdown of almost six months due to planned and unplanned works since August 2019.
• Spring cracker maintenance works in Europe include Dow (Tarragona, Spain), Sabic (Wilton, UK), INEOS (Dormagen, Germany) and Shell (Wesseling, Germany).
• Equipolymers has restarted one of its two PET lines in Schkopau, Germany following a three-week long maintenance work which started on March 9.
• Kem One declared force majeure on PVC deliveries from its site in Saint-Fons, France on 19 February because it had an interrupted supply of VCM feedstock after a barge was damaged on the Rhône River.
• Borealis issued a force majeure declaration for its Stenungsund steam cracker in Sweden on 8 April 2020 as a consequence of a technical incident.
• Maintenance work is being carried out at the Unipetrol PP facility in the Czech Republic in April.
Consumer demand surges
Plastic packaging demand has been strong since mid-March as a result of consumers stockpiling food, drink and hygiene products due to imposition of lockdowns by national governments. However, it is uncertain whether that high demand would be sustained once supply chains adjusted to the lockdowns.
Plastic product suppliers to the automotive end other parts of the economy that have been shut down by Covid-19 have been hard hit by falling demand and uncertainty.
OPEC+ tentatively agreed to cut production by 10 million barrels/day in an effort aimed at stabilising the volatile oil market, starting on May 1, 2020. Despite the scale of the agreement concerns remain that weaker demand due to coronavirus amid lower oil consumption will continue to provoke oversupply. For May, a further reduction in feedstock costs and plastic prices seems the most likely scenario.