05 February 2001 00:00 [Source: ICB]
Polymer prices have been under pressure in January from new capacity, softer olefin prices and soft demand. For PVC it has been a rout. Producers are now determined to reverse the fall.
Polyethylene producers are seeking a 15pfg/kg price rise right across the board for 1 February. They have been losing money over the last months as a result of rising feedstock costs and falling polymer prices. 'We have to take a stand here. If it does not stick we will not supply. It does not make any sense to produce,' was one major player's comment.
Ethylene contract prices have fallen from E705/tonne in Q4 to E665/tonne in Q1, but in dollar terms remain constant. Producers say the delta between polyethylene and ethylene prices is at its lowest in ten years. For lldPE it has reached historically low levels.
High natural gas prices have led to major US players taking down or severely cutting back ethylene and derivative production. Polyethylene production has been cut by around 20% as US producers try to recoup the margin with a 5 cent/lb hike asked for January and a second 5-6 cent/lb asked for February. This lost production could have a knock-on impact on the global marketplace, especially as it is likely to coincide with a pickup in Asian demand after the lunar New Year.
HdPE markets in Europe are in better balance than the lldPE market. Producers say stocks are very low and prices only 2-3pfg/kg lower than November. The main erosion is in injection moulding grades, and prices for west European material now range from DM1.77-1.82/kg. Traders quote much lower numbers of DM1.62-1.67/kg as producer stock clearances through distribution channels in December pressure January numbers. Import pressure receded in the final quarter of 2000 and is not seen as a major factor behind price erosion. Blow moulding and film grades are holding steadier, at DM1.80-1.87/kg, say producers.
LdPE prices, claim producers, came under pressure in January and have softened to DM1.75-1.82/kg. Traders say lower levels of DM1.65-1.75/kg are available in the marketplace, but once again these are said to be principally the result of stock clearances at the year end. Demand is reasonable and pre-buying has been avoided.
LldPE is priced at least 20pfg/kg lower than ldPE. Producers talk of January prices in the DM1.55-1.60/kg range, but some contracts have not been settled and one admitted DM1.53-1.58/kg was a likely outcome. Traders prices are as low as DM1.40/kg in the Benelux region, the market most affected by producers' year-end inventory clearance and imports of lower cost material from new Middle East capacity at Yanpet.
Polypropylene prices came off 2-3pfg/kg on average in January on all grades, despite the major cutbacks put in place by European producers at year end. Raffia grade prices are at DM1.60-1.67/kg, injection grade is priced at DM1.65-1.69/kg and copolymer at DM1.75-1.79/kg. Basell idled around 300 000 tonne/year at Wesseling, Germany and Carrington, UK. Both the Wesseling and Carrington units have been idle since early January. Borealis has also slowed production. While the Q1 propylene settlement at E525/tonne may help recover margins, it also undermines price increase efforts.
Converters have now been running on low inventories since late last year and are expected to come to market to replenish their stocks. On the back of this expected rise in demand, some producers have tabled a 10pfg/kg price increase for February and expect the market to tighten considerably during February and March due to reduced production rates in Europe and to production problems in early January. New capacity is due in Q1 in Greece (145 000 tonne/year) and in Saudi Arabia (320000 tonne/year).
Polystyrene markets remained very subdued during January and prices rolled over in spite of the 20pfg/kg price increase asked. Demand is still low and most producers are operating at reduced rates while others will go ahead with planned maintenance in February and March. Most producers expect demand to pick up towards the end of the first quarter and seek a 20pfg/kg price increase for February. However, the E115/tonne drop in the styrene contract price will undermine efforts to raise prices. After months of destocking, demand is expected to improve, mainly from the packaging sector. Very limited volumes are coming into Europe from Asia, as European prices are not very attractive and duties do not make it economical to move product west.
PVC prices slipped considerably again in January, losing 10-12pfg/kg on top of the 8-10pfg/kg lost in December. This puts levels across most of Europe around DM1.30-1.33/kg, with producers admitting DM1.28/kg has been bid in the market. Margins are thus under pressure even though ethylene and chlorine feedstock prices have declined.
Demand for the full month is reasonably good - better than the first month of last year. But a slow return to buying activity in the first two weeks of the year and manoeuvring for market share are behind the sharp slide. The position in Italy is particularly weak, with east European and North African material available in the market.
Early indications for February are that the best that can be hoped for is a rollover at current levels. Beginning March, EVC, AtoFina and Shin-Etsu all have extended VCM shutdowns and, with destocking at converters ended, producers are bullish for a sharp rebound in March and April pricing. With current levels of pricing, imports are expected to decline as product heads to better returns in the Far East.
|Monthly contract, DM/kg|
|High density polyethylene (hdPE)|
|Film (extrusion) grade||1.82-1.87||1.80-1.85|
|Linear low density polyethylene (lldPE)|
|Film grade (butene-based)||1.58-1.65||1.54-1.59|
|Low density polyethylene (ldPE)|
|Polyvinyl chloride (PVC)|
The left hand column gives a guide to price levels for large-to-medium size buyersfor general purpose grades in December. The right hand column shows the latestprices for January. Implied exchange rates are based on 30 January levels of:
$1:euro1.084; $1:DM2.121; $1:£0.686; euro1:DM1.955; euro1:£0.362.
(R) indicates revised figure
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