Prices under pressure from low demand and falling costs

November saw a mixed price picture for European standard thermoplastics. The month began with polymer producers attempting to pass through the increase in feedstock costs in full onto processors. However, very low demand and competition from imports kept a firm lid on planned price hikes.

Polyolefin prices generally followed an upward trend following six consecutive months of falling notations. L/LDPE prices increased by €15-20/tonne after the C2 contract price was settled €35/tonne higher. HDPE blow moulding prices nudged €10/tonne higher while blown film and injection moulding prices were mostly rolled over. For PP, specialty product prices increased by €10-20/tonne while commodity product prices was largely rolled over.

PVC, polystyrene and PET prices, on the other hand, declined further. Base PVC prices dropped by €70/tonne, polystyrene prices fell by €50-60/tonne and PET resin prices were  down by €60/tonne last month.

In December, standard thermoplastic prices declined across the board as a result of lower feedstock costs and weak demand and exacerbated by converters reducing stock levels prior to end-of-year accounting.
Polyethylene and polypropylene prices had fallen by just less than the €25/tonne and €30/tonne respective reductions in the ethylene and propylene reference prices by mid-December. Further price concessions were expected as larger customers were to negotiate price agreements later in the month.
Base PVC prices have continued to decline with a fall of €50/tonne by mid-December. Polystyrene prices saw a triple-digit reduction following the €132/tonne fall in the styrene monomer reference price. PET prices plunged by a further €50/tonne amid considerable market turbulence.

Demands very low
Polymer demand has continued at a very low level across most end-use markets during the last two months. While demand has picked up slightly for the food and pharmaceuticals packaging sectors, demand from most other markets is well below normal levels. In December, order activity is further constrained by the short production month and by converters reducing stock levels prior to the year-end accounting.

Supply tight
European producers have trimmed production and brought forward plant maintenance programmes to counteract the low demand. There is however sufficient material available to meet the needs of converters. Supply has also been supported by a steady inflow of imported material. The high European prices and lower freight rates are tempting producers to divert more of their cargoes to Europe.

A summary of the latest production issues is presented below:

• TotalEnergies resumed its PS production in France by end of November. Still, sources reported that it will take some time to lift the force majeure. Overall PS availability is expected to improve after two months of absence of the producer
• A fire at the Versalis site at  Dunkerque, France on the weekend of 10^th December has shut down the cracker and also the polyolefin downstream plants
• The 350,000tonnes/year LDPE plant in Ruwais, Abu Dhabi run by Borouge is expected to resume operations by end-2022
• The LyondellBasell cracker in Berre, France, offline since a fire in August 2022, will not go back onstream until early 2023Major maintenance work on the OMV cracker in Burghausen, Germany is complete, and the plant is being gradually restarted.

January outlook
The outlook for standard thermoplastic prices at the start of the New Year is unclear. Much will depend on whether demand rebounds after a period of very low ordering activity. Local supply will remain tight due to production curbs, but import pressure is likely to prevail. Crude oil prices are rebounding in mid-December on an unclear supply outlook amid an ongoing shutdown at key North American crude pipelines and further easing of China’s strict Covid measures.

L/LDPE
The €35/tonne increase for the ethylene reference price contributed to a €15-20/tonne rise in the price of L/LDPE in November. Production cutbacks and maintenance programmes kept production at a low level. However, the tight supply situation was eased somewhat by imports from the USA and Asia.
The overall demand was fairly mixed. While there was an upturn in sales to the packaging sector, many other processors decided to postpone orders until New Year.
In December,  L/LDPE price agreements had fallen by €15-20/tonne by mid-month due to the lower ethylene reference price (down €25/tonne), the short production month and very weak demand. With few large price agreements having settled at time of writing, L/LDPE prices are expected to fall further during the rest of the month. Supply remains tight yet many converters are not buying additional stock for accounting reasons. 

HDPE
In November, HDPE producers were largely unable to factor in the €35tonne rise in the ethylene reference price due to weak demand. Blow moulding prices nudged €10/tonne higher while blown film and injection moulding prices were mostly rolled over.
Material availability was tight as European producers continued to cut production rates but supply was supplemented by cheaper imported material. There was no sign of an improvement in ordering activity.
HDPE prices fell during the first two weeks of December due to weak demand and a reduction of €25/tonne for the ethylene reference price. Price settlements were around €15/tonne down on the previous month, but as few large deals had been agreed, a further reduction was expected later in the month. Material availability remained tight and converters were only buying the absolute minimum with an eye on their end-of-year stock position.

PP
PP producers pushed through a price increase of €10-20/tonne for specialty grades in November following the €20/tonne rise for the propylene reference price. Commodity product prices at the lower end of the price range were largely stable as a result of competition from cheaper imports.
Supply remained tight as producers maintained low production levels. However, cheap Asian imports significantly improved overall availability. Demand was at a low level as converters kept a close eye on inventory as the year end accounting period approached.
PP prices are falling in December as a result of weak demand and a reduction of €30/tonne for the propylene reference price. Price agreements settled during the first two weeks of the month were mostly €15/tonne down on closing November levels. However, as few large deals had been agreed by mid-month, further concessions are considered likely as the month progresses.

PVC
Weak demand and competition from cheap imports pushed base PVC and PVC compound prices down by €70/tonne in November.
While a significant proportion of European PVC production was down as a result of cutbacks and maintenance programmes, Asian imports adequately filled any gaps in supply. Demand continued at a low level. Converters bought only sufficient material to cover their immediate production needs with an eye on the year-end balance sheet.
PVC prices have continued on a downward trend during the first two weeks of December as a result of low demand and a reduction in ethylene feedstock costs. Price settlements agreed by mid-December were down by €50/tonne compared to the previous month. Further price concessions are in the cards as the festive season approaches. While local producers have curbed production there is still an ample supply of imports.

PS
PS prices dropped by €50-60/tonne in November even though the styrene monomer reference price had settled just €4/tonne lower. Producers factored in the impact of lower energy costs into their sales prices. Supply is tight as European producers have significantly trimmed back production over recent months. Demand remained low as converters bought just sufficient material to cover their immediate production needs.
In December, polystyrene producers were not prepared to give away more than a part of the €132/tonne reduction for the styrene monomer reference price. By mid-December, both GPPS and HIPS price agreements were some €100/tonne lower compared to the previous month. Little change is expected during the rest of the month as business starts to wind down in the approach to the festive season.
Supply remains tight and demand weak as converters keep an eye on stocks for year-end accounting purposes.

PET
In November, European PET prices continued to tumble as a result of over-supply, weak demand and competitively-priced Asian imports. PET contract prices fell by around €60/tonne over the month as a whole. European PET resin remains over-supplied despite production cutbacks by European producers. Asian imports are also widely available, often at very aggressive prices. Converters’ stock levels are more than adequate to cover the very low demand.
The PET market turmoil accelerated into December with prices tumbling by around €50/tonne by mid-month. While the November paraxylene cost finally settled down by €40/tonne, PET producers struggle to pass through higher utility costs.
While European producers have curbed output to counteract the weak demand, converters are increasingly turning to more aggressively-priced Asian material. December is traditionally a weak month for PET demand, and further price concessions are likely to follow.