Feedstock costs prompt rising resin prices in Europe

In April, European standard thermoplastic prices rose sharply once again following a further hike in monomer costs. Polyethylene settled in line with the higher ethylene cost while polypropylene prices were raised by just less than the propylene cost settlement. Polystyrene and PVC price levels increased well above the rise in feedstock costs. Overall, supply remained tight while demand faltered with prices at such high levels.

Low density and linear low density PE prices increased by €200-250 per metric ton, which is in line with the €230/tonne rise in the cost of ethylene. PP prices just failed to match the €225/tonne increase in the propylene contract price following strong buyer resistance.

PS prices increased by more than the €360/tonne rise in the styrene monomer (SM) reference cost. The SM cost spike reflects the sharply rising cost of gas and concerns over its future availability.

PVC prices reached a new record high in April with a gain of €200/tonne, which is well in excess of the proportionate impact of higher ethylene costs on PVC production.

Bottle-grade PET prices rose by just €10/tonne as costs fell and the tight supply situation eased a little.

Supply tight

In April, material availability for PE, PVC and PS remained limited, and, in some instances, customers were put on allocation. Styrene monomer supply has been impacted by the shutdown in Shell’s Moerdijk cracker in the Netherlands and production cutbacks at other cracker plants due to high energy costs. The PP sector was in better balance with most contracts fulfilled. Imports into Europe from Asia were generally lower for most polymer sectors in April as a result of logistics bottlenecks.

A selection of the latest production issues is summarized below;

• Naphthachimie shut down its cracker in Lavéra, France on April 13 following a leak in the supply of seawater for cooling. The Lavéra cracker is a major supplier of VCM for four French PVC plant.
• Kem One has placed PVC customers on allocation following the disruption to the ethylene feedstock chain caused by the Naphthachimie cracker shutdown
• Trinseo declared force majeure on PS production in Terneuzen, the Netherlands in early April as a result of technical issues
• Shell shut down styrene production at the Moerdijk, the Netherlands plant on April 21 due to technical problems
•  Inovyn declared force majeure for deliveries throughout Europe on May 4, which affects the entire PVC production at its sites in Belgium, France, Germany, Norway, Spain, Sweden, and the UK
• Vinnolit, Germany and Kem One, France, have also announced force majeure at their respective PVC facilities.

Demand falters

In April, buyers expressed growing concerns over a possible economic downturn and the very high polymer price levels. Consequently, many converters tended to buy only the bare minimum volumes to meet current production needs. Some sectors are performing better than others, with building and construction and household appliances continue to outperform, while ordering from the automotive sector remains low.

May outlook

This month, PE and PP prices are falling following respective declines of €70/tonne and €65/tonne for ethylene and propylene prices. PE prices were down around €50/tonne during the first week of trading with PP prices down by close to €100/tonne. PET prices are also likely to head downward as feedstock costs fall. PVC prices also finally turned downward in May with reductions of around €30-35/tonne as lower demand outweighed tightening availability. PS prices, on the other hand, are rising by €65-70/tonne, which is just less than the €84/tonne increase in the styrene monomer reference price.

LLDPE and LDPE producers pushed through further exorbitant price increases in April due to higher feedstock and energy costs. Following the rise of €230/tonne in the ethylene contract price, L/LDPE producers called for price hikes of €250-300/tonne, depending on suppliers’ production levels and the extent to which an energy surcharge was passed through in the previous month. In April, L/LDPE deals settled €200-250/tonne higher compared to the previous month.

Production remained at normal levels and suppliers were in most cases able to fulfill contractual obligations. Uncertainty caused by the war in Ukraine coupled with very high prices curbed demand. Some converters even extended the Easter break due to the high prices and the uncertain outlook.

In May, L/LDPE prices fell by close to the €50/tonne reduction in the ethylene contract price during the first week of trading.

HDPE
In April, high density PE producers called for a significant price hike of €300/tonne as a result of higher energy costs and an increase of €230/tonne in the ethylene contract price. However, producers settled for price increases of around €200/tonne for most standard grade material due to subdued sales. The very high price level has deterred many converters from ordering any more material than is absolutely necessary.

There were few production issues affecting HDPE plants in April and there was sufficient material available to meet demand. As the spring plant maintenance season is about to move into full swing, supply is however likely to tighten over the next few months.

In May, HDPE prices fell around €40-50/tonne during the first week of trading due to the €70/tonne reduction in ethylene, growing imports arriving in Europe, and low demand.

PP
In April, PP producers responded to the €225/tonne hike in propylene costs by calling for a price increase of €300-350/tonne to cover both the higher feedstock and energy costs. The PP sector was also unnerved by the prospects for gas supply as a result of the Russia-Ukraine war. By end month however, PP prices had increased in line with monomer cost.

Buyers balked at the exorbitant prices sought at the start of the month and refused to negotiate. By mid-month, however, buying interest recovered as PP producers reluctantly backed down from their initial price stance. On the supply side, there was sufficient material to meet demand although the upcoming plant maintenance season is likely to tighten availability.

Decreases of around €100/tonne were reported during early May trading following the €70/tonne fall in propylene costs.  

PVC
In April, PVC producers announced sizeable planned price hikes ranging from €185/tonne to €250/tonne. This reflected an energy surcharge, plus the 50 percent cost pass-through from ethylene, which rose by €230/tonne. Base PVC resin prices increased €200/tonne by end April.

Regional PVC supply remained low as a result of several planned and unplanned plant outages. Imports from Asia were also down due to the production restrictions as a result of the zero COVID policy of the Chinese government.

Record price levels are curbing demand. Converters are struggling to pass through the higher energy prices onto most of their customers and are only buying additional material to meet their immediate needs.

PVC prices finally turned downward for the first time since mid-2020 in early May trading. Base PVC prices fell €30-35/tonne as lower demand outweighed tightening availability.

PS
PS prices hit a new record level in April surpassing the previous high set in May 2021. Producers tabled planned price increases between €415-430/tonne. The bulk of the rise stemmed from a €360/tonne increase in the April styrene monomer reference price settlement and the rest from an energy surcharge. For April as a whole, PS prices increased by slightly more than the feedstock cost rise.

Material availability has tightened as a result of production issues and a cutback in PS output. Demand faltered in April due to the sky-high prices, the Easter holidays and the shorter working month. Many processors are having trouble passing through higher costs to end users and are cutting back on purchases.

This month, PS producers have announced planned price hikes of €90-120/tonne after the styrene monomer cost rose by another €84/tonne.

PET
In April, the surge in bottle-grade PET prices started to ease with only modest gains of around €10/tonne being seen.

While supply remained tight in April as a result of maintenance turnarounds at plants in Southern Europe, there was some slight easing in material availability elsewhere. Imports from the Fast East were down as European buyers shunned Chinese material due to the ongoing logistics backlogs and late shipment terms.

The war in Ukraine is casting a shadow over normal expectations for a seasonal upturn in PET bottle demand. Converters are limiting their polymer purchases to a bare minimum and continue to face difficulty in passing through cost increases to their customers.

This month, PET prices are likely to soften following a rollover for the April paraxylene reference price and lower monoethylene glycol (MEG) costs.