Polymer Pricing March 2012 - Report PIE - Plastics Innformation Europe

Standard Thermoplastics in March 2012: Significant margin improvement for PE and PVC in Q1 / Stable costs keep PS and EPS in check / Scant supply improvement / High prices dampen demand / Fresh hikes in store

In view of the high prices for western European standard thermoplastics, converters cut back ordering activity quite considerably in March. Unfazed, producers announced increases of up to EUR 150/t for polyolefins and EUR 90/t for PVC. This was intended not only to cover the significant increase of EUR 86/t in the cost of ethylene and the EUR 90/t rise in propylene, but also to pad margins. With the cost base for PS and EPS stable, the proposed price hikes of EUR 40/t were aimed solely at widening margins.

Numerous production problems across the polymer spectrum in March created supply bottlenecks and helped producers push through a margin increase despite already high price levels. Due to a lack of alternatives, western European buyers had no choice but to swallow hikes of up to EUR 120/t for PE and PP. With a rise of EUR 65/t for PVC, producers succeeded in boosting margins by EUR 20-40/t across the board for all ethylene-based materials. In contrast, PS and EPS stagnated.

European ethylene supplies were disrupted by the stoppages in Moerdijk / The Netherlands and Cologne / Germany. Some PE production lines also experienced problems, but the dramatic shortage of VCM and PVC eased and a brief disruption in PS cropped up shortly before the end of the month. Only EPS remained free of supply problems – apart from maintenance turnarounds.

The generally high prices frightened off in particular buyers from the consumer hygiene and food packaging applications. Due to shrinking order books, some PE converters even shut down parts of production. PVC benefited from the approaching building season, but the spark for EPS was not yet ignited as many converters were still sufficiently stocked.

At the beginning of Q2, feedstock gyrations subsided considerably, although ethylene (C2) rose by a further EUR 40/t and propylene (C3) by EUR 50/t. Instead of the breathing spell hoped for by converters, polymer producers intend to resume their efforts in April to restore margins, in addition to passing on higher costs. One has called for an increase of EUR 150/t, but hikes announced so far average EUR 70/t for PE and up to EUR 75/t for PP. Producers of PVC have decided to seize the day and kick off the spring season with price hikes of up to EUR 125/t. Sellers of PS and EPS were waiting for a confirmed styrene monomer (SM) contract and had not yet made any moves. Indications are that SM will remain more or less flat if the renewed C2 increase is offset by a minor decline for benzene. An initial European benzene contract price for April is said to have been agreed at EUR 890/t (down EUR 37/t). In any case, all producers will naturally try to improve margins. Overall, business in April will be fairly quiet, but buyers will not be spared the occasional price increase.

Engineering Thermoplastics in March 2012: More grades succumb to upward price trend / Output remains tight / Demand starts to soften / April price hikes could fall short of producers' expectations

As was to be expected, the spate of engineering thermoplastics price increases continued to spread in western Europe in March. With the exception of POM and PMMA, all other engineering plastics covered in this report have now been affected by the wave of feedstock price increases in Q1. Leading the field were ABS and PP, the same trailblazers as of previous months, which saw notations rise by as much as EUR 90/t. In the case of PC, PA and PBT, by contrast, the upper ends of the PIE ranges were the first to react to the price calls producers had announced with a view towards the start of Q2. Smaller volumes of more specified grades saw prices rise by up to EUR 50/t.

In an effort to tighten supply, producers had initiated several production cutbacks in Q4 last year, a strategy they continued to follow in 2012. However, they were seldom able to achieve much more than a balance with demand, which has turned out to be much more subdued than imagined. There are clear signs of a slowdown in the automotive sector, especially when it comes to the small and mid-size models earmarked for the euro markets. So far, the effects of this let-down have not been dramatic – especially as E&E continues to be lively in many areas – although it is forcing producers to lower their grandiose price plans to a more realistic level.

Among the olefins, April’s propylene notation rose by another EUR 50/t. Just as refineries factor in a margin improvement when setting the price of petrol, cracker operators, too, are striving for windfall profits coupled to the increase in oil prices in Q1. Often it is the very same players pursuing their all too familiar strategy. For good or for bad, those PP contracts tied to C3 will have to follow this rise. An initial European benzene contract for April was fixed at EUR 890/t, down EUR 37/t. Although production levels are likely to remain lower than last year, a look at the different world regions points to demand continuing to slacken as well, particularly in China. This will inevitably put a damper on producers' ongoing efforts to hike prices, which means that not all of them will be able to make up the reduction in margins they suffered in Q1.

For more than 34 years, PIE has been an invaluable source of information for European plastics industry decision makers - a quick, yet in-depth look at the development of plastics markets and polymer prices. Available online 24/7 and as a printed newsletter twice a month. To read the entire report, go to www.pieweb.com and sign up for a 48-hour free trial!

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PIE Polymer Pricing Report February

PIE Polymer Pricing Report January

PIE Polymer Pricing - December

For more than 34 years, PIE has been an invaluable source of information for
European plastics industry decision makers - a quick, yet in-depth look at the development of plastics
markets and polymer prices. Available online 24/7 and as a printed newsletter
twice a month. To read the entire report, go to www.pieweb.com and sign up for a 48-hour free trial!