Standard thermoplastic prices in Europe have taken a sharp upturn over the last two months due to higher feedstock costs, and, in the case of polyolefins, bottlenecks arising from shipping delays in the Red Sea.
In February, polyolefin prices took a surprisingly sharp upturn, especially as both the ethylene and propylene reference prices increased only slightly higher. Polyolefin markets became concerned about the supply implications of cargo delays and rising logistics costs around the Red Sea following attacks on commercial shipping by the Houthis. Consequently, producers were able to ask for triple-digit price increases without too much resistance.
Polystyrene prices increased in line with the €190 per metric ton increase for the styrene monomer reference price.
PET packaging prices began February with price gains but ended the month with an overall decline because of an influx of cheap Asian material and a smaller rise than expected for the paraxylene reference price.
Base PVC prices were stable following a small rise in the cost of ethylene; PVC compound prices increased around €20 per tonne because of higher additive costs.
Polyolefin prices continued to soar well above €30 per tonne and €35 per tonne rises for ethylene and propylene during the first two weeks of March. Polystyrene prices also soared for the second successive month due to a sharp rise in the cost of benzene.
Base PVC prices increased in proportion to the rise in ethylene. PET prices are softening further due to growing pressure from imports and low demand.
Supply tight
The attacks on commercial shipping in the Red Sea have led to the late arrival of cargo from Asia, rising freight rates and tighter supply, particularly for polyolefins. There is however now evidence that freight rates are falling back from the heights seen in January.
European polymer output remains tight across all polymer classes as producers maintained low run rates. A number of planned and unplanned plant outages, particularly affecting the polypropylene sector, have also been announced to further restrain supply.
A summary of the latest supply-related market developments is provided below;
- Polypropylene imports into Europe from the U.S. could be disrupted as force majeure was called on March 10 at Invista’s Kansas site due to a technical issue.
- Sabic reported an unplanned outage at an unspecified European PP site on March 7 which will likely impact mainly PP film grades.
- Repsol declared force majeure March 5 for polypropylene from its site at Tarragona, Spain due to unforeseen technical issues and temporarily suspend its supply agreements for the polymer
- Versalis announced that its styrene plant in Italy will shut down mid-April for maintenance.
- Ineos declared force majeure at the Lillo, Belgium high density polyethylene plant Jan. 31 due to some technical issues.
- TotalPC announced that its PP plant in Gonfreville, France, was taken offline for maintenance.
Demand low
Demand has barely recovered since the start of the new year and remains well below what would normally be expected as the first month of spring is now upon us. A few end use markets are however slowly sparking back into life; including packaging film, pharmaceutical packaging and profile extrusion. However, the overall sentiment remains weak amid uncertain economic times; most converters are buying just enough material to meet their immediate production needs.
Outlook
Converters will push for lower price increases over the remainder of the month. Their cause will likely be supported by lower demand due to the Easter holidays and improved supply from the expected arrival of imports.
Low denisty polyethylene, linear low density PE
In February, LDPE and LLDPE prices surprisingly increased sharply despite only a €5 per tonne rise for the ethylene reference price. Producers leveraged the turmoil in the Red Sea to their advantage and were able to hike prices by €140-150 per tonne without much resistance. Buyers had little choice but to pay the hefty hikes due to very thin material availability caused by delays in arrival of imports and PE plant outages.
LLDPE and LDPE producers began March asking for price increases of up to €150 per tonne. The calls, however, proved unrealistic because of low demand and a rise of just €30 per tonne for the March ethylene reference price. Price settlements varied widely but on average contracts were being settled €70-80 per tonne higher by mid-month.
Supply was very tight because of production restrictions, unplanned plant outages and a low volume of imports. Call-offs remained very low.
HDPE
In February, HDPE producers called for triple-digit price increases even though the ethylene reference price had risen by only €5 per tonne. Price increases ranging from €100-120 per tonne were passed through without much buyer resistance. Supply was tight because of the reduced availability of imports, tight production controls at European PE plants and unplanned plant outages.
HDPE prices increased on average by €70-80 per tonne during the first two weeks of March. However, fewer deals than normal were concluded because of a late settlement for the ethylene reference price. Converters remain hopeful that contract settlements may ease back a little as availability improves over the remainder of the month.
Material availability remains tight because of ongoing production restrictions and late arrival of cargoes from Asia. Overall, demand was well below normal, but an uptick in call-offs for film grades has been reported.
PP
PP producers were able to push through price increases ranging from €140-150 per tonne in February on the back of tightening supply, despite the propylene reference price settling just €15 per tonne higher. Material availability was hindered by several unplanned plant outages, production restrictions and import bottlenecks because of the turmoil in the Red Sea area. The demand position remained subdued.
PP prices are again increasing at a hefty rate and well above the €35 per tonne rise for propylene. Settlements varied widely, but on average all PP grades were up €100 per tonne by mid-March over closing levels from the previous month.
Supply is getting very tight on the PP market as several producers reported unplanned plant outages in March. PP homopolymer film material, in particular, has very limited availability. Demand remains weak as many converters are running down their stocks.
PVC
In February, some producers tried to hike prices, but a combination of weak demand and sufficient supply meant that base PVC prices were generally carried over from the previous month’s closing level. PVC compound prices increased by €25 per tonne due to an increase in the cost of additives. Supply remained low, but the turmoil in the Red Sea had less of an influence on PVC availability. Demand remained below normal levels.
PVC producers were seeking price increases of €20-30 per tonne at the beginning of March. However, few deals had been struck by mid-month due to late settlement of the March ethylene reference price.
There is sufficient material available despite production cutbacks and a series of planned and unplanned plant outages. Demand remains much lower than normal but a seasonal upturn in call-offs from construction is expected in springtime.
PS
In February, a sharp rise in benzene and styrene spot prices led to a surge of €190 per tonne for the styrene monomer reference price. General-purpose PS prices increased by slightly more than the SM cost rise because of limited material availability. Supply was restricted by producers maintaining strict production controls. Demand remained weak due to pre-buying in January; converters were ordering just sufficient to meet their immediate needs.
PS prices are significantly higher once again this month; by mid-March general-purpose PS prices are up by €200 per tonne compared to a rise of €222 per tonne for styrene monomer.
Material availability remains tight due to ongoing production cutbacks. Meanwhile, demand continues to be weak and has been further dampened by the skyrocketing price of the material. Converters are only buying what is absolutely required to meet their immediate production needs.
PET
February was a month of two halves for PET prices. In the first half of the month, PET prices increased due to an expected substantial rise for the paraxylene reference price and an expectation of rising demand. However, from mid-month, PET prices started to tumble following an arrival of cheap Asian material and a smaller rise than expected ($15 per tonne) for the February paraxylene reference price. Overall, PET prices fell by around €20 per tonne in February.
PET prices are easing slightly during the fist two weeks of March because of limited pressure from feedstock costs, higher imports and a lower demand than expected.
The supply situation is set to improve as a couple of PET plants are likely to be back online soon. Producers hope that the start of the beverage bottle-making season will give the sector a boost.