In May, European producers of most standard thermoplastics have obtained margin-widening price hikes for the third month in a row. Once again the increase in polyolefin prices was way above the rise in feedstock costs.
The rise was mainly attributable to a spate of production issues that have shortened supply. During the first four months of the year, seven companies declared force majeure at 14 European polyolefins plants, affecting plants that account for close to 20 percent of polymer capacity.
As a result, polyolefin prices continue to reach close to record highs. This month, low and linear low density polyethylene prices increased 140-150 euros per metric ton ($158 to $170) compared with the 80 euros per tonne ($90) rise in the ethylene contract price. HDPE faces the shortest availability of all polymers at present and notations skyrocketed by 180 euros per tonne. Polypropylene gained 150 euros per tonne compared with the 75 euros per tonne rise in the propylene contract price.
Material availability remained very tight in May as a result of a large number of cracker and polymer plant outages. Producers' inventories are extremely low and many sellers reported that stocks had been sold out by mid-month. Imports have also been scarce due to the weakness of the euro against the dollar.
The latest production outages are:
• Three days after a fire shut down the Shell Deutschland Oil cracker at Wesseling, Germany force majeure was declared for ethylene and propylene produced at the site on May 13.
• After Shell Deutschland Oil announced force majeure for ethylene from its plant in Wesseling, Germany, Vinnolit declared FM for S-PVC from its site in the Knapsack industry park, near Cologne, Germany.
• Reports indicate that one of the three Antwerp, Belgium-based crackers operated by Fina Antwerp Olefins — a subsidiary of Total SA — has been switched off. The French group has reportedly announced force majeure for both ethylene and propylene produced at the NC2 plant.
• Ineos declared force majeure for all S-PVC deliveries from its plant in Wilhelmshaven, Germany on April 21 as a result of a "serious production problem" at the site's VCM production facility.
There are however signs that some plants that have suffered outages are coming back on stream.
• Borealis lifted the forces majeures it had announced for PE and PP from its site in Schwechat, Austria and for PP from its site in Kallo, Belgium on 14 May.
• Shell in early May began the initial phase of restarting its cracker in Moerdijk, The Netherlands. The facility is to be ramped up successively over the course of the next two months.
• Versalis on May 5 officially lifted the force majeure it had announced for LDPE and LLDPE from Dunkirk, France on 12 March.
Furthermore, higher volumes of imported material are expected to arrive over the coming months attracted by the high European prices.
Polymer demand has been good across all product sectors, with the exception of polystyrene, during May. Both converters and end users have desperately sought sufficient volumes to meet growing order intake. Food and drink packaging and building and construction were the liveliest sectors. Some pre-buying was evident with further price increases expected in June.
While there may be some relief in sight with some plants returning to production and more imports, further price hikes have been predicted for June.