Subdued sales, larger supplies prompt resin prices drops in Europe

European standard thermoplastic prices fell across the board in June because of persistent weak demand, lengthening supply and lower feedstock costs.

Linear low density polyethylene, LDPE, polypropylene and PVC prices fell by significantly more than the reduction in feedstock costs. LLDPE and LDPE prices fell by €110-120 per metric ton compared with a reduction of €80 per tonne for the ethylene contract price.

PP prices fell by €100-110 per tonne against a reduction of €80 per tonne for the propylene contract price. PVC prices fell by €80 per tonne, which is twice as much as the proportionate impact of higher ethylene on the PVC cost base.

The fall in high density PE, polystyrene and PET prices tended to closely mirror the drop in their respective feedstock costs. HDPE prices fell by €80 per tonne, PS prices fell by €130 per tonne and bottle-grade PET fell by €55-60 per tonne.

Supply lengthens

There was more than sufficient material available to meet demand despite producers maintaining strict output controls to achieve a better market balance. This is explained by growing inventories at producers and an ample supply of imported material.
A summary of the latest supply-related developments are summarized below:

• Vinnolit lifted force majeure for PVC production at its facilities in Germany on June 22.
• Borealis declared a force majeure for polypropylene at its plant in Kallo, Belgium, on June 9 due to “an unforeseeable technical incident during the start-up after the planned turnaroun,” explained the company.
• Spanish supplier Repsol shut down a polypropylene plant in Tarragona, Spain, on June 13 due to “unforeseen and unavoidable technical issues.” The company has also declared force majeure for the material. No indication has been given on a restart date.
• BorsodChem shut down its PVC plant in Hungary on July 1 for maintenance with restart scheduled for Sept. 1.

Demand disappoints

Demand weakness has persisted into the summer months; normally a period in which sales for seasonal markets such as beverages and construction are expected to rise. Demand remains in the doldrums across most end sectors mainly because of the economic malaise affecting most European countries and ample stocks at processors. Furthermore, processors bought only enough material to meet their immediate production needs with prices expected to fall further in July.

Standard thermoplastic prices continued to fall across the board during the first two weeks of July due to lower feedstock costs and ongoing demand weakness.

PE prices are falling €40-5 per tonne compared with the €40 per tonne decline for the ethylene contract price, although some larger buyers are gaining more favorable discounts. Homopolymer PP prices are falling at a similar rate to the €50 per tonne decrease for the propylene contract price while copolymer injection prices are down €70 per tonne.

PVC prices continue to decline at a slightly faster rate than is dictated by the reduction in feedstock costs due to persistent weak demand and lengthening supply.

PS producers announced planned price discounts ranging from €65 per tonne to €70 per tonne starting July 1. Early indications are that PS prices are falling by slightly less than the €87 per tonne reduction for the styrene monomer reference price.

PET prices are also under pressure due to disappointing demand from the beverage bottle-making sector and competition from cheap Asian imports. However, the June paraxylene reference price settled €15 per tonne higher, which producers hope may be an indication that prices are bottoming out.
Market demand is likely to be further restrained during July and August as converters wind down their operations during the summer holiday season.

Polymer producers have responded to the developing market imbalance by further throttling run rates at their production plants, where feasible.

LLDPE/LDPE
In June, LLDPE and LDPE prices fell sharply because of a reduction in the cost of ethylene and persistently low demand. LDPE prices fell €120-125 per tonne while LLDPE prices were down €110-115 per tonne compared to the €80/tonne reduction in the cost of ethylene.

Supply was more than sufficient despite the production cutbacks. This is explained by a high level of inventories at producers and an ample supply of imported material. Demand weakness persisted across most end markets. Processors bought only enough material to meet their immediate production needs with prices expected to fall further in July.

In July, the LLDPE and LDPE price trend was set by a reduction of €40 per tonne for the ethylene reference price. LLDPE and LDPE price settlements varied widely but on average were down by €40-50 per tonne in early trading as producers curbed run rates even further to better balance the market.

HDPE
In June, HDPE prices closely tracked the €80 per tonne reduction for the ethylene contract price. Blow moding, injection molding and blown film prices each fell by €80-85 per tonne. Bigger  discounts were given to those customers ordering larger volumes.

Material availability has been kept under tight control by production cutbacks but imported material meant that there was sufficient supply available to the market. Demand levels remained weak across most end markets and producers ordered just enough to meet their immediate needs given their high stock levels.
In the first two weeks of July HDPE prices tended to follow the €40 per tonne reduction for the ethylene contract price. The good market balance is being threatened by a further reduction in order intake because of low seasonal demand as Europeans take a holiday. Producers maintained output controls to counter the lower demand.

PP
In June, PP prices fell by slightly more than the €80/tonne reduction for the propylene reference price. PP homopolymer film prices fell by €110/tonne with homopolymer injection and copolymer injection prices falling by €100 per tonne.

Producers’ inventory levels have swelled despite producers further reducing run rates at their plants. There was also plenty of imported material available. Demand weakness persisted across major markets such as automotive and packaging. Buyers adopted a cautious approach in view of further price cuts likely to come in July.

PP prices are indeed declining during the first two weeks of July. In view of the weaker demand brought about by the summer holiday season, homopolymer PP prices are down in most cases in line the €50 per tonne reduction for the propylene contract price with copolymer injection prices down €70 per tonne due to tighter supply.

PVC
In June, PVC prices tumbled further because of lower costs and weak demand. Producers hoped to minimize the price reduction to the proportionate impact of €40 per tonne from lower ethylene costs on PVC production costs. However, base PVC prices fell by twice this amount. Flexible PVC compound prices fell by €70 per tonne with rigid PVC compound prices down by €60 per tonne.

Producers maintained strict output controls at their plants to curb supply yet there was plenty of material available to the market through imports. Low order levels from the construction industry kept a firm lid on demand.

A decline of €40 per tonne for the ethylene contract price and a further reductions in the cost of additives pushed base PVC and PVC compound prices even lower at the start of July. The summer holiday season has restrained demand even further.

PS
In June, ongoing weak demand and lower feedstock costs pushed polystyrene prices sharply downward. PS prices fell more or less in line with the €127 per tonne reduction for the styrene monomer reference price although much bigger price discounts were available for larger customers.

Producers maintained strict output controls to enable a better market balance, yet there was more than enough material still available to meet demand. Demand remained very weak in view of the difficult economic situation.

In July, PS prices fell even further following the €87 per tonne reduction for the styrene monomer reference price. General-purpose PS prices had fallen by a similar amount to the feedstock cost by the second week of the month with high-impact grades following in line. No change to the excess supply situation is anticipated this month; demand remains very weak.

PET
At the beginning of June, market expectations were for a more stable price trend. However, there was a further notable fall in bottle-grade PET prices with settlements down on average by €55-60 per tonne. The May paraxylene cost settlement dropped by €105 per tonne and there was also a plentiful supply of imports available at very competitive prices.

European producers cut the run rates at their plants even further to better balance supply against the low market demand. Indeed, demand failed to recover as expected, despite the warmer weather.

PET prices are again under pressure at the beginning of July. There is limited scope for producers to cut back production further and there is a plentiful supply of cheap imported material available to the market. Demand is unlikely to approach normal levels this month as buyers take their summer holidays.