Plastics Monitor: Buyers resist substantial price hikes

07 February 2005 00:01  [Source: ICB]

Efforts by European commodity plastics producers to recover higher feedstock costs floundered in January. Certain grades of polyolefins registered a roll-over in prices, with maximum increases of €30/tonne in more buoyant sectors. January was a short month, with many players not seriously engaging with the market until 10 January, and even then buying interest was sluggish.

Market players now admit that December’s extremely strong volume sales figures were partially due to pre-buying by converters. A degree of de-stocking in January was one reason buyers were able to resist more substantial price hikes. However, converters also talk of disappointing order books, which means machines were run well below capacity. This also stiffened resistance to last month’s posted price hikes.

The presence of greater quantities of competitively priced imported material in Europe – due to a dip in Chinese demand and prices – also limited sellers’ opportunities to raise domestic polymer prices. There are now indicators that Chinese polymer markets are recovering. Prices have edged up as traders and distributors have begun buying in advance, anticipating a surge in demand following the passing of the Lunar New Year holiday period.

European polymer producers are keen to see prices rise in February. They point out that they have yet to pass on the €40/tonne and €65/tonne hike in quarter one (Q1) ethylene and propylene contract prices respectively. Increases of €20-50/tonne have been introduced into the market for February. Sellers also note that supplies remain tight. Producers believe the repercussions of the spate of unscheduled cracker outages is still being felt. Tight feedstock availability has limited polymer output and left producers with low inventories, which need to be repaired.

The availability of cheaper imported hdPE limited Euro-pean producers’ attempts to raise prices in January. The turbulence caused by imports meant injection moulding prices rolled over from December, while film prices jumped by €10/tonne and blow moulding by €20/tonne.

LldPE producers achieved price hikes on the back of tight availability, due in part to the outage at Polimeri’s 200 000 tonne/year unit at Priola in Italy. However, sellers are largely disappointed with the level of January’s price hikes, which saw butene grade numbers rise by €10-20/tonne.

European ldPE sellers increased prices by €20-30/tonne in January, with strong demand helping to push numbers up. The hike contributed to the widening delta between ldPE and lldPE. The ongoing outage at Basell’s 320 000 tonne/year unit in Aubette, France, is keeping supplies snug and lessening buyers’ resistance to higher prices. Sellers have announced hikes of up to €50/tonne for February.

Polypropylene (PP) producers failed to claw back the €65/tonne increase in propylene monomer contract prices last month. Increases of €20-30/tonne were recorded for PP in January. Industry sellers say they are determined to return to the market this month to pass on higher costs. Market observers note that the re-negotiation or removal of discounts and rebates has led to more substantial price hikes in recent weeks than those reported.

Polystyrene prices dropped by an average €140/tonne in January, following the massive fall in styrene of €185/tonne. Players say they are fed up with see-saw pricing; styrene monthly barge contracts have now settled at €980/tonne – an increase of €150/tonne. Polystyrene sellers had been expecting a hike closer to €100-120/tonne, with the higher figure representing the increase in costs to styrene sellers following the €154/tonne benzene hike. Some polystyrene sellers had been set to announce around €100/tonne hikes but one producer says it will now have to revise its target closer to €150/tonne. Sellers admit that margins were improved in December and January when benzene and styrene costs fell, but say this could easily be eroded if costs are not passed on.

Demand picked up in January as players restocked after Christmas and predictions for February are positive. Not all grades of polystyrene are readily available so some buyers are looking to pre-book material. Producer stocks have been kept relatively low due to the volatile pricing conditions. Production rates are still around the 70% level overall.

PVC activity is gathering pace after a slow start to the year, with players optimistic that business will be brisk over the coming months. Despite targeted increases of around €30/tonne, prices have again rolled over. However, sellers are already setting their sights on ‘achievable’ hikes of €20-50/tonne this month to offset ethylene’s €40/tonne increase for Q1.

Asian PVC values are on the up, which players hope may be a sign that volumes are improving. Numbers ‘reached a low point’ early last month but are now expected to rise by $40-50/tonne after the Lunar New Year.

No turnarounds are under way but several are scheduled over the next few months in Italy, Poland, Sweden and the UK. One producer says it plans a short turnaround at its Norway facility, although it is not yet decided whether this will take place in April or August.

The pipes sector is doing reasonably well, although sources say that profiles business is sluggish due in part to the ‘struggling’ Russian market.

EUROPEAN COMMODITY POLYMERS PRICES

	Monthly contract, €/tonne
	December	January
High-density polyethylene (hdPE)
Injection moulding	1060-1090	1060-1090
Film (extrusion) grade	1100-1120	1110-1130
Blow moulding	1060-1080	1080-1100
Linear low-density polyethylene (lldPE)
Film grade (butene-based)	1180-1200	1195-1205
Low-density polyethylene (ldPE)
Film grade	1220-1230	1245-1255
Polypropylene (PP)
Raffia grade	1045-1065	1070-1085
Injection moulding	1075-1115	1100-1135
Copolymer	1115-1135	1140-1150
Polystyrene (PS)
General purpose	1300-1320	1160-1180
High impact	1340-1360	1200-1220
Polyvinyl chloride (PVC)
Suspension	965-995	965-995
The left-hand column gives a guide to price levels for large-to-medium size buyers for general purpose grades in December. The right-hand column shows the latest prices for January. Implied exchange rates are based on 31 January levels of: $1:€0.767; $1:£0.530; €1:£0.691. (R) indicates revised figure

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