Low demand thwarts hike attempts

04 June 2001 00:00  [Source: ICB]

As the holiday season approaches, producers are under pressure to achieve stability and most say a rollover is the best they can expect as buyers watch price developments from the sidelines

European polymer producers failed to push through price increases announced for May, due to lower than expected demand for this time of year.

Most producers said they expect to achieve a rollover at best for June prices as buyers keep on the sidelines and watch price developments.

Cutbacks continue to be implemented in polystyrene production, with Dow Chemical joining other European majors in a bid to reduce inventories and reverse the negative price trend of recent months.

Producers are under pressure to achieve stability or better numbers before the summer holiday period starts.

HdPE producers were unsuccessful in their attempts to boost prices in May and numbers are quoted at a rollover for both injection and blow moulding grades, at DM1.77-1.82/kg and DM1.80-1.87/kg respectively. Undeterred, some suppliers are seeking to improve poor margins in June with talk of a push for 10 pfg/kg. The market is sceptical, with some expecting a rollover to be the maximum achievable.

Much depends on demand next month, but for May some producers report fairly healthy sales in line with forecasts, while others still note a lacklustre market. Consumers have adopted a wait-and-see attitude, restricting their current purchasing to a minimum.

Producers emphasise their inventories are not particularly high, following various shutdowns, removing pressure to sell hdPE at more competitive prices. Imported material from South America and the Middle East is still in evidence, but the high US dollar against the euro is protecting Europe from a large influx of material. PE output resumed at EniChem's Priolo plant late May.

European ldPE markets are looking slow, with demand failing to pick up momentum this month. May prices have remained steady at DM1.80-1.90/kg. Producers perceive that many customers are purchasing on a hand-to-mouth basis, in the expectation that the market may not yet have bottomed out.

Nevertheless, producers insist that margins are already very poor and that a rollover for June would be the minimum they could realistically accept. But buyers, noting better availability this month, have their sights set on a lower price. They are supported by competitively priced imports, although these have been curbed by the strong US dollar.

An unchanged lldPE price has emerged for May, steady at DM1.65-1.70/kg despite a push for a 10 pfg/kg hike. Producers stress the need to hang on to this level in June, since margins are still inadequate. However, some expect that even a rollover in June will be an uphill struggle. Following the tighter market in April, availability has now improved, and the market is more balanced. But rumours of imports from North Africa and South America threaten to disrupt the European market.

Polypropylene producers failed to push through the remainder of the 15 pfg/kg price increase announced in March and April and only achieved 'disappointing' 1-2 pfg/kg increases in some cases in May. However, for the most part, numbers rolled over at DM1.60-1.70/kg for raffia grade, DM1.70-1.74/kg for injection moulding and DM1.80-1.84/kg for copolymer material. Slower than expected demand and improved production rates did not allow players to increase numbers further this month after the 4-5 pfg/kg achieved during April. Producers say June is the last opportunity to achieve a substantial price increase before the holiday season starts and several players have already announced increases. Dow has announced a 5 pfg/kg hike and DSM a 10 pfg/kg increase as of 1 June. Basell has also announced a E50/tonne hike for the same period as demand is expected to grow through June and July. Producers say they need to be firmer on prices next month as 'margins remain at unsatisfactory levels'.

Polystyrene prices are still under pressure after suffering significant erosion in April and no beneficial effects have so far been noted in the market following the cutbacks implemented by Europe's major producers. Dow joined Atofina, BASF and EniChem implementing cutbacks in production by idling its German production facility.

No further major erosion was reported, except on a limited number of accounts, and numbers remain at DM1.55-1.60/kg for general purpose material and DM1.65-1.70/kg for high impact product. Producers believe the market may be close to bottoming out and some hope for a price reversal in June and July.

Other cutbacks may follow if the situation does not improve in the next two months, a producer said. All the major European players have announced price increases averaging 20 pfg/kg for June and July based on signs of demand improving across the board.

PVC producers failed to achieve price increases in May after several months of price hikes. After suggesting they were looking for a 10 pfg/kg increase, producers asked for half this and the result was a rollover at DM1.37-1.45/kg.

Supply is not a major issue in the market. Stocks at producers are described as modest, but demand is lower than expected at this time of year. One consultant suggested converters bought too much in quarter one and do not need to purchase so much now.

Expectations are now for a period of steady pricing through June and July, with neither buyers nor sellers able to exert enough pressure to shift prices one way or the other.

EUROPEAN COMMODITY POLYMERS PRICES

	Monthly contract, DM/kg
	April	May
High density polyethylene (hdPE)
Injection moulding	1.77-1.82	1.77-1.82
Film (extrusion) grade	1.80-1.85	1.80-1.85
Blow moulding	1.80-1.87	1.80-1.87
Linear low density polyethylene (lldPE)
Film grade (butene-based)	1.65-1.70	1.65-1.70
Low density polyethylene (ldPE)
Film grade	1.80-1.90	1.80-1.90
Polypropylene (PP)
Raffia grade	1.65-1.70	1.65-1.70
Injection moulding	1.70-1.74	1.70-1.74
Copolymer	1.80-1.84	1.80-1.84
Polystyrene (PS)
General purpose	1.55-1.60	1.55-1.60
High impact	1.65-1.70	1.65-1.70
Polyvinyl chloride (PVC)
Suspension	1.37-1.45	1.37-1.45

The left hand column gives a guide to price levels for large-to-medium size buyers for general purpose grades in April. The right hand column shows the latest prices for May. Implied exchange rates are based on 30 May levels of:

$1:E1.171; $1:DM2.290; $1:£0.705; E1:DM1.956; E1:£0.602.

(R) indicates revised figure

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