Technical problems lift polymer players' spirits

22 February 1993 00:00  [Source: ICB]

POLYMER PLAYERS are adopting an increasingly optimistic tone. They are claiming and/or pushing for price increases across all plastics except hdPE, and even here price moves are expected by March. But all admit to an uphill struggle against continuing demand weakness. A string of PP producers followed Neste's late January price hike move by announcing 30-40pfg/kg price hikes to take effect from 1 March. Inevitable cutbacks on production at Neste Beringen, Montefina Feluy and North Sea Petrochemicals Antwerp following the Fina force majeure (ECN 8 and 15 February), extended outage at Repsol Puertollano and a series of rumoured technical problems elsewhere could assist.

Announcements on PP increases have been made by Himont for 30-40pfg/kg, Hoechst for 35pfg/kg, Neste for 40pfg/kg, Shell for 30pfg/kg, and BASF, which is looking for 40pfg/kg on lower end prices and 30pfg/kg on the top end. One player said a further attempt could be made on 1 April on the basis of expectations of Q1 and Q2 propylene contract hikes, but most producers expected the current efforts to be spread over two or three months.

Attempts at price increases will meet strong resistance from buyers at a time of still unsatisfactorily high stocks, although producers claim 70% average industry operating rates have brought these down to within 1.4-1.5 months of sales. But there is evidence that converters are pre-buying to build up stocks prior to March, and this has led at least one producer to halt further February sales across its network.

High-density polyethylene players now hope and believe they have reached the bottom of the downward price cycle, although pressure remains on blow moulding. Some players are hoping for upward price movement in March. But others are still too pessimistic to hazard a date, while one player admitted hikes would be dependent on higher ethylene Q1 settlements, a questionable prospect.

Producer stocks are still thought to be high despite operating rates around 75-80%, and producers acknowledge the need for further cutbacks in line with poor volume figures in January. But it is argued converters have low stocks and are buying only to satisfy their own orders. Any price hike announcement would have to be brought into immediate effect to avoid significant pre-buying, or so the argument runs.

LdPE producers are confident that February will see a floor price of DM1.15/kg established in most countries of continental Europe, although in the UK and Scandinavia currency movement has undermined the DM1.15/kg minimum price announced at the beginning of the year. This discrepancy would be addressed by looking for compensatory increases in weak currency areas in March with more conservative increases in the core German and French markets. Shell's new line at Carrington will start up this month and the Dow Repsol Tarragona line is now back on, although an accident last Friday at the terminal could create problems there. Compensating for capacity increase will be several maintenance outages over the next months.

Producers have seen lldPE prices creep up, virtually eliminating prices below 90pfg/kg and effectively establishing 90-95pfg/kg for February. Producers are managing capacity to prevent supply moving ahead of market demand. Market sources suggest that ROW's 100 000 tonne/year plant at Wesselling, although technically complete, will not start up until market conditions improve.

Polystyrene prices appear to be diverging even further with producers in Germany and France said to be achieving price increases over the past month, taking general purpose grade prices into the DM1.30-1.40/kg range. Producers are pushing to maintain an 8-10pfg differential between this price and high impact grades. In the UK prices as low as £500/tonne for general purpose grade are still available although producers claim £540-570/tonne more closely represented a market range.

Korean product is said to be limiting European producers' export opportunities in traditional export markets, although large sales to Iran are said to have been made for February. Korean product is also a factor in European spot markets, undercutting European producers prices by up to 10%. Once the duty free import ceiling has been reached it is anticipated that these volumes will disappear from the European market.

PVC margins are still under pressure, due to rising chlorine and VCM prices at a time when PVC producers' price hikes have been only moderately successful. Optimistic projections are now for target increases to DM1.20-1.25/kg to be attained by end-March. One player claimed 10pfg/kg increases had been achieved since December, taking prices to DM1.10-1.20/kg. Another spoke of continued price pressure in markets like France, with roll-overs and some minor increases in Germany/Benelux, putting current prices at DM1.10-1.12/kg.

UK buyers said a still weakening sterling had forced Mexican, Brazilian and US exporters to raise prices to a new £425/tonne minimum, despite seller quotes of current prices at £435/tonne and attempts to hike them to £470/tonne.

Plastics price report
	Market price, (DM/kg)
	January	February
High density polyethylene (hdPE)
Injection moulding	0.90-0.95	0.90-0.95
Film (extrusion) grade	1.10-1.15	1.05-1.10
Blow moulding	1.00-l.10	1.00-1.05
Linear low density polyethylene (lldPE)
Film grade (butene based)	0.90-0.95	0.90-0.95
Low density polyethylene (ldPE)
Film grade	1.05-1.10	1.10-1.15
Polypropylene (PP)
Raffia grade	0.80-0.90	0.80-0.90
Injection moulding	0.85-1.00	0.80-0.90
Copolymer	1.00-1.25	1.00-1.25
Polystyrene (PS)
General purpose	1.20-1.35	1.30-1.40
High impact	1.30-1.40	1.40-1.50
Polyvinyl chloride (PVC)
Suspension	1.00-1.15	1.10-1.15
The left hand column gives a guide to price levels for large-to-medium size buyers and for general purpose grades in January 1993. The right hand column shows the latest prices for February.

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