Another boom month for European polymers

17 November 1997 00:00  [Source: ICB]

A number of factors including the French truckers' strike have combined to drive up demand in European polymer markets.

Polymers are benefiting from the pickup in the European economy although producers admit the French truckers' strike could have boosted October sales. November orders are strong so prices should be steady or even slightly up. Now the year-end is approaching convertors are discussing 1998 pricing with their customers and have a strong interest in not undermining polymer prices. However, it is also a period when pressure on prices grows as players unload stocks to improve the end of year cash flow picture. The weakening dollar and very low Asian prices threaten increased imports, especially if European prices rise further.

Polypropylene (PP) markets in September and October have been very strong, with pre-shipping ahead of the French truckdrivers' strike influencing October volumes. However, producers are experiencing a strong start to November too. The European PP market is showing 11.2% growth on 1996 so far this year and is well balanced having absorbed the new Amoco, DSM and Repsol production. Outside Europe new plants and lower than expected demand from China have thrown the Asian and US markets out of balance and prices are under a lot of pressure. Europe continues to be protected by dollar strength against the deutschmark and by the 12% import duty. However, the situation is becoming borderline with very low Asian prices, possibly below $600/tonne fob Thailand, making imports increasingly likely in the New Year. There are signs that producers were over-optimistic on October price projections and these have been revised down with November prices effectively rolling over October prices. Raffia grade is priced under DM1.40/kg in some markets. Injection moulding grades are talked DM1.45-1.50/kg and GP co-polymers in the DM1.55-1.65/kg range.

HdPE producers have enjoyed strong sales through July to October and all indications are that November will be another strong month particularly in NWE. One German player talked of German customers' plants fully loaded until the year-end. Convertors have reduced pressure on their raw material suppliers to lower prices now that their own negotiations with downstream customers for 1998 pricing have begun. Film prices are steady. Producers are claiming prices in the DM1.63-68/kg range for injection moulding grades, a few pfennigs up on October prices. The volatility of the injection moulding market has encouraged Europe's producers to move into higher-value market niches and now demand at the commodity end of the market has revived it has created shortages. Selective shortages in blowmoulding grades are appearing but prices appear to be steady in the DM1.67-1.75/kg range.

LdPE markets have remained strong into October and producers say indications are for continued strength into November with little pressure so far from new lldPE production in Europe and the Middle East. The French truckers' strike led to some pre-buying in October and early November but producers were unable to quantify the impact. Prices have remained steady although it is clear that the largest buyers have managed to resist the DM1.70/kg minimum price asked for October and November with producers admitting to prices of DM1.68/kg. One producer saw the strengthening ethylene price as lending support to ldPE producers' arguments for price stability.

LldPE prices are still running 7-8 pfg/kg below ldPE. Inventories are low, around three-weeks supply and demand has continued strong into November with lldPE up around 10% on 1996 to date. Here too the French truckers' strike probably increased October sales. Convertors have been operating with low stocks and lldPE producers claim that any production hiccup appears to create problems downstream in the plastics chain. Some felt there was potential for the differential between lldPE and ldPE, now 7-8 pfg/kg, to narrow even further in the run up to the year-end.

Production from Polimeri Europa's new Brindisi unit has been absorbed so far. The biggest problem Europe faces is the potential for large imports from the new Equate unit moving into Europe at the beginning of next year which could put pressure on European lldPE prices.

Polystyrene's strong demand through September and October has continued into early November, say NWE producers. Half of October's 10 pfg/kg target was achieved, bringing prices to DM1.60-1.65/kg, although smaller producers quoted as low as DM1.50/kg for GP grades. Major producers are targeting DM1.65/kg minimum for November. The high impact grade delta of 8-10 pfg/kg is steady. Producers' low stocks are causing some concern and Dow has placed some customers on 75-80% allocation. Dow's Lavrion, Greece plant closed for maintenance during November and BP Chemicals' Wingles, France plant shut on 15 November for ten days' maintanence.

PVC producers achieved close to DM1.45/kg minimum in October and are hoping to achieve 1-3 pfg/kg more to firmly establish a DM1.45-1.50/kg range. Larger producers expect 1-2 pfg/kg above this. Demand is outstripping supply in Europe. Stock levels are reported at one to two weeks, and production is running at full rates. Solvay's ten-day turnaround in Belgium was delayed by one day to 31 October. Solvay customers remain on allocation throughout Europe. The truck strike in France had caused inquiries to soar elsewhere in NWE. Solvay was forced to reduce operating rates at its 250 000 tonne/year Tavaux, France plant for a few days. Others report difficulties supplying to Spain and Portugal. Imports to NWE are low and US material is unattractive at current exchange rates. Players believe the fall in Far East prices is beginning to stabilise. Numbers are now $720-740/tonne cif China.

European prices				Monthly contract,	DM/kg
	October	November
High density polyethylene (hdPE)
Injection moulding	1.60-165	1.63-1.68
Film (extrusion) grade	1.70-1.75	1.70-1.75
Blow moulding	1.67-1.75	1.67-1.75
Linear low density polyethylene (lldPE)
Film grade (butene-based)	1.60-1.65	1.60-1.65
Low density polyethylene (ldPE)
Film grade	1.70-1.75	1.68-1.75
Polypropylene (PP)
Raffia grade	1.40-1.50	1.38-1.45
Injection moulding	1.45-1.50(R)	1.45-1.50
Copolymer	1.55-1.65(R)	1.55-1.65
Polystyrene (PS)
General purpose	1.60-1.65	1.60-1.70
High impact	1.68-1.73	1.68-1.78
Polyvinyl chloride (PVC)
Suspension	1.42-1.47(R)	1.45-1.50
The left hand column gives a guide to price levels for large-to-medium size buyers for general purpose grades in September. R indicates a revised price. The right hand column shows the price indications for November. Implied exchange rates are based on 7 November levels of: FF:DM3.349; Lira:DM981.2; BF:DM20.64.; Pta:DM84.51; SKr:DM4.367: DM:£2.890; US$:DM1.706

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