European processors of standard thermoplastics were shaken in April by unprecedented material shortages and price hikes that they said bore no resemblance to the increase in the cost of feedstock.
Material availability shortened considerably from late March due to a series of forces majeures being called at major polymerization plants, and a number of extended plant maintenance programs. As a result, producers' stock levels are very thin, and many plastic processors — particularly polyolefin film extruders — report such a severe material shortfall that some production lines could even grind to a halt.
Market tightening is being exacerbated also by the weakness of the euro. The depreciation of the European currency is making imports less attractive, and at the same time is encouraging a diversion of material for export.
Polymer producers seized the opportunity to capitalize on tight supply by implementing massive price hikes.
Polyolefin prices increased three to four times more than the rise in monomer costs. High density polyethylene saw price hikes of 190-200 euros ($203-$213) per metric ton, or the equivalent of about 10 cents per pound. Low density PE film grades were up 175 euros ($187.6) per tonne while polypropylene prices skyrocketed by 185 euros ($198) per tonne.
PVC prices also increased much more than feedstock, up 80 euros ($85.7) per tonne compared with a proportionate 27.5 euros ($29.4) per tonne ethylene cost rise. Polystyrene prices, meanwhile, slightly exceeded the rise in styrene monomer costs, while PET prices moved up in line with the cost base.
Major supply bottlenecks developed from late March and into April as a result of an unusual number of forces majeures being called by major polymer producers, including at least six at major resin suppliers.
Just as the supply situation worsened, demand picked up across most end-use sectors at the onset of spring. Polymer demand is also benefiting from the rise in consumers' disposable incomes brought about by the decline in oil prices. Converters would have ideally liked to purchase additional material to top up their inventories, but were mostly thwarted by lack of availability.
It seems likely that polymer prices will continue to rise well into May. Further feedstock cost increases are in the cards with crude oil on an upward least during the first half of last month. Demand can also reasonably be expected to grow as the spring buying season gets into full swing. The tight feedstock and PO supply situation is however likely to remain for at least another month.
Four situation in resin supply has prompted the four largest national organizations representing the plastics packaging industry in Europe, Elipso (France), IK (Germany), the British Plastics Federation and the Packaging And Films Association — representing the United Kingdom — to call on polymer producers to invest urgently in European polymer production facilities.
The organizations believe that polymer producers are increasingly likely to invest in the faster growing markets of Asia and the Americas under current conditions. Consequently there is unlikely to be significant forthcoming investment to support the European marketplace. The situation is made worse because an aging resin plant is more prone to breakdown and likely to suffer from maintenance issues frequently cited among the spate of recent force majeure declarations, which have caused growing concern in the industry.
In a joint statement the U.K., German and French organizations said: “Europe is a global leader and powerhouse of innovation not only in plastics packaging technology but also in waste management organization and techniques such as recycling and the incorporation of recyclate into plastics packaging products.
“The development of this expertise here in Europe can support the stronger evolution of plastics packaging markets and indeed the acceptance of plastics packaging around the world. For this we need the polymer producers to invest in the production of their raw materials here in Europe.”
The four organizations also paid tribute to plastics packaging converters who have been skilfully managing the situation of interrupted supply and higher prices in the last months.
“This has been a high wire balancing act amid conditions not witnessed for many years”, the statement noted.