Production cutbacks leading to better market balance

This story first appeared in our sister publication Sustainable Plastics.

In October, European standard thermoplastics prices presented a mixed picture, both between the various product types and within the same product class.

L/LDPE producers initially targeted price increases of up to €150/tonne, despite a €45/tonne reduction in ethylene costs. Weak demand and competitively-priced imports however meant that LDPE prices fell slightly while LLDPE prices, which did not face such strong competition from cheaper imported material, increased by €20-30/tonne.

Polypropylene prices traded downward across the board even though propylene costs had fallen by €50/tonne.

Polystyrene prices continued to fall in October even though the styrene monomer reference price increased by €9/tonne. PVC prices fell as a result of low demand and a growing inflow of cheaper imports.

Bottle-grade PET contract prices also fell sharply in October as a result of aggressive import prices, lower costs and weak demand.

Purchasing activity remained well below normal levels across most product classes in October. Converters were concerned about the deteriorating economic situation and worries about a possible recession.

European converters are also increasingly looking to meet more of their needs with cheaper imported material. Import prices are more competitive as a result of falling freight rates out of Asia, which are now at their lowest since 2020.

Packaging and pharmaceuticals demand held up fairly well last month, but demand from other sectors such as construction, consumer goods and furniture, is declining.

European producers have trimmed production and brought forward plant maintenance programmes in response to 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:

• The 350,000tonnes/year LDPE plant in Ruwais, Abu Dhabi run by Borouge is expected to resume operations by end-2022; 

• Indorama Ventures declared force majeure on production of PTA and PET in Rotterdam, the Netherlands on 18 October;

• TotalEnergies declared force majeure for PP throughout Europe after encountering “technical problems” at its two large Belgian polypropylene plants in Feluy

• The LyondellBasell cracker in Berre, France, offline since a fire in August 2022, will not go back onstream until early 2023; 

• Major maintenance work on the OMV cracker in Burghausen, Germany is complete, and the plant is being gradually restarted;

• Anwil SA resumed operations at its S-PVC facility in Poland on 21 October following a maintenance shutdown.

In November, polymer markets are close to balance and there is now limited potential for major price development, despite higher feedstock costs. Production rates have been trimmed across all standard thermoplastic classes, which has reduced material availability, more into line with the low demand levels.  

Polyethylene prices are likely to either move sideways or decline slightly, despite a €35/tonne rise in ethylene costs. PP prices are expected to show limited movement, even though the propylene reference price increased by €20/tonne.

Low demand is expected to lead to a reduction in PVC base material and rigid S-PVC compound prices with stable plasticiser prices limiting any reduction to flexible S-PVC prices.

Subdued sales will likely lead to lower polystyrene prices, despite a small rise for the styrene monomer reference price. PET prices will be under further pressure as a result of ongoing demands weakness, a reduction in feedstock costs and competitively-priced imports. 

In October, European L/LDPE producers called for a €150/tonne price hike, including a surcharge to cover higher energy costs. The €45/tonne reversal for the ethylene reference price settlement, however, and weak demand, made such price calls unrealistic. LDPE prices fell by €20/tonne while LLDPE prices, which did not face such strong competition from cheaper imported material, increased by €20-30/tonne.

L/LDPE demand remained well below normal with converters concerned about the deteriorating economic situation and worries about a possible recession. European producers have also trimmed production in response to the low demand. Material availability was also been impacted by strikes in France.

The €35/tonne increase for the November ethylene reference price is unlikely to lead to a significant L/LDPE price rise this month. While production is down, demand is weak and energy costs have been falling.

At the beginning of October European HDPE producers called for price increases of €100/tonne, including a portion to cover higher energy costs. However, purchasing activity was simply too weak for HDPE grades to sustain such a large price hike. The €45/tonne fall in the October ethylene reference price also restrained producers’ planned price hikes.

Blown film and injection moulding products actually gained €20-30/tonne as significant reduction in production led to material shortfalls. Blow moulding prices remained largely unchanged.

HDPE demand remained well below normal with converters concerned about the deteriorating economic situation and worries about a possible recession.

In November, weak demand is expected to drive down blow moulding and injection moulding prices despite the €35/tonne rise in the ethylene reference price. Blown film prices, on the other hand,  are expected to show limited movement.

European polypropylene producers initially tabled planned price hikes of €50-100/tonne after five straight months of price rebates. The planned price hikes however were unattainable in practice given the prevailing low demand and a reduction of €50/tonne in the propylene reference price. By end-October, settlements varied from a decrease of €20-30/tonne for homopolymer film to decrease of €50/tonne for homopolymer injection and copolymer injection.

PP demand remains at a low level with converters buying tentatively. PP producers have trimmed back production run rates by 20-30% in recent months in an effort to achieve better market balance. Material availability has also been disrupted by strikes and planned and unplanned plant shutdowns.

PP prices are set for limited movement in November. Lower energy costs and low demand are likely to counterbalance the €20/tonne increase in the propylene reference price.

In October, PVC prices fell as a result of subdued demand, competitively-priced imports and the lower ethylene reference price settlement. Base PVC prices dropped by €70/tonne to hit a new year-low. Rigid S-PVC compound prices also slipped by €70/tonne while flexible S-PVC compound prices dipped by only €40/tonne as plasticiser prices ticked upward.

Producers have reduced run rates in order to achieve a better demand-supply balance. However, caustic soda, a bi-product of PVC production, has seen prices soaring in recent months, which could encourage PVC producers to ramp up production. Purchasing activity slowed further in October across all end use markets, with the exception of pharmaceuticals.

In November, low demand is expected to lead to a reduction in PVC base material and rigid S-PVC compound prices with stable plasticiser prices limiting any reduction to flexible S-PVC compound prices.

Polystyrene prices dropped again in October despite a €9/tonne rise in the styrene monomer reference price. Producers took into consideration a reduction in energy costs and low demand. General-purpose polystyrene (GPPS) prices fell by €60/tonne with high-impact polystyrene (HIPS) prices down by €50/tonne.

PS supply is more than adequate to meet the subdued levels of demand despite production cutbacks and the declaration of force majeure by a major producer at a site in France. Demand has fallen due to growing concerns about an economic downturn and inflation. While packaging demand has held up fairly well, purchasing activity from other end-use sectors such as consumer goods and furniture, is declining.

Weak demand is leading to a slight softening in PS prices in thin early November trading, despite a small (€4/tonne) increase in the styrene monomer reference price.

Bottle-grade PET contract prices declined by €80/tonne in October as a result of competition form aggressive-priced imports, lower feedstock costs and weak demand.

European PET producers are under growing pressure from very competitive import offers, mainly from Vietnam, India, South Korea and China. Import prices are more competitive as a result of falling freight rates out of Asia, which are now at their lowest level since 2020. PET demand for local product remains low as European converters are increasingly meeting more of their needs with cheaper Asia material.

PET producers, who are stuck between higher costs and weaker consumption, have lowered run rates or have brought forward maintenance shutdowns to curb supply.

PET prices are set to fall further in November as a result of ongoing demands weakness, a reduction in feedstock costs and competitively-priced imports. 

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