MATERIALS PRICE MOVEMENTS
Recent movements in raw materials:
April 2015: Movements in plastics prices – provided by British Plastics Federation + reports from North America
PE: “Nothing short of catastrophic” was the way in which one player PIE spoke to aptly described the supply situation on the European PE market in April. The numerous restrictions caused by FMs, coupled with production cutbacks caused by the shortage of ethylene as well as outages and maintenance turnarounds left enormous gaps in producers’ stocks. Nevertheless, the price level initially remained too low to arouse the interest of importers. The cost factor – the ethylene contract had risen by EUR 55/t – played no role at all, as no buyer was able to escape triple-digit rises. Depending on the previous price level, some hikes even exceeded EUR 200/t.
All signs point to further rises in May. Although the monthly ethylene contract has added “only” EUR 80/t, producers are once again calling for up to EUR 200/t, which – if they succeed – would take notations to record levels. While availability will likely remain tight in the coming weeks, the situation should slowly start to improve. Record margins offer a strong incentive for producers to ramp up production, and April’s price level has once again become attractive to importers, too. There have already been reports about shipments making their way to Europe from North America and the Middle East, although they are unlikely to arrive before June. This means that notations will likely increase by triple digits again in May, even if the rises could fall short of those seen in April.
PP: After a dramatic turnaround in March, prices virtually exploded in April. The main factor behind the increases for standard material was not the C3 reference contract, which rose by only EUR 55/t, but rather the tight market, which led to polymer price hikes up to EUR 200/t and in some cases even more. By contrast, compounds prices remained below the general cost rise as a result of their being indexed to C3. The spread between high-end standard PP and engineering compounds narrowed unusually.
The price of standard grades is expected to rise by triple digits in May. Compounds will most likely follow the C3 cost rise of EUR 75/t. For independent compounders who buy base PP the air is becoming dangerously thin.
Nevertheless, it looks like the current market situation could turn around in May. For one, the tightness should ease as the attractive margins European producers are now seeing provide an impetus to ramp up production. In North America, PP notations fell again last month, making exports to Europe increasingly attractive to producers there. The higher European prices will rise in the first third of the month, the more imports could arrive. This means that the price upswing could peak within the near future.
PVC: Having started the month with calls for triple-digit hikes, European PVC producers throughout April steadfastly held on to their goal of lifting their margins. As the month wore on, their efforts were increasingly backed by ever tightening availability. In the final tally, the hikes were quite heterogeneous, with the extent varying depending on the region, previous level and the contract’s timing. The cost of PVC base material could rise by an average EUR 75/t and the price of blends and paste grades could increase by the same amount.
Notations are expected to increase further in May. The monthly ethylene contract was fixed EUR 80/t higher, and the FM announcement for material from Wilhelmshaven / Germany is keeping availability tight, even if the servicing of another plant has now been wrapped up. Producers’ calls currently reach up to EUR 120/t, and depending on previous price levels and future developments, they might even succeed at gaining the full amount.
PS: Those who thought March’s price increases were excessive were dealt another blow in April as notations continued to climb. The SM reference contract skyrocketed by EUR 300/t, and most producers swiftly passed on the full cost rise. They were aided by tight availability of all styrenics, as a result of which processors focused on securing volumes rather than on limiting their costs. Following the increases of the last two months – for normal PS grades the hikes have come to EUR 480/t – the price of PS, ABS and EPS packaging materials has reached a level last seen in autumn 2013.
Yet it still looks like there is more to come. May’s SM contract rose by another EUR 20/t and initial announcements indicate that producers plan on passing on at least this latest cost rise. Processors will have little choice but to accept these demands if they want to secure the necessary volumes. “It’s a seller’s market,” was the sentiment expressed by most players PIE spoke to. However, the high price levels are beginning to take a toll on many processors, most of which are unable to pass on the full extent of the recent cost explosion. As a result, many of them are hoping for a turnaround in June. The recent rise in oil and benzene prices, however, could lead to smaller reductions, that is, if prices start falling at all.
PET: Following the course set in the preceding month, European PET notations continued to make gains in April, as producers were able to push through rises exceeding the cost increase. European manufacturers relished in the fact that for the first time in several years they succeeded at lifting their margins to what they consider to be an acceptable level. The main reason they were able to do so is the euro’s weakness, which has caused a previously steady stream of imports to dry up. As a result, availability at the start of the bottling season has declined to the volumes turned out by the rather muted output of European production lines. The global cost rise also played a role, as PET prices in North America and Asia began pointing upward, too.
By mid-month, PET recyclate prices also started showing first signs of responding to March’s primary market rises. This upward trend is likely to last into May – after all, the dearth of imports coupled with an ongoing cost increase at a time of rising demand are all signs that point to further increases in virgin PET prices.
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PP prices fall as PS rises: report from North America
North American prices for polypropylene and polystyrene resins traveled different paths in April, with PP prices dropping and PS rising.
PP prices in the region fell an average of 4 cents per pound in April. Prices for propylene monomer fell by 6 cents, but sources said that PP makers were able to limit the resin price slide to 4 cents, holding on to the remaining 2 cents for margin improvement.
“Margin expansion is real,” a PP contact in the Midwest U.S. said. “The market is tight and the [PP] industry has high operating rates right now. A lot of resin capacity was taken out during the recession, but now suppliers are close to getting back to reinvestment economics.”
The price drop is the second consecutive monthly drop to hit the PP market, and the fourth in five months. Regional PP prices now are down a net of 24 cents since December, including drops of 10 cents each in December and January.
In the PS market, prices jumped an average of 5 cents per pound, following a price increase of almost 25 percent for benzene feedstock, which is used to make styrene monomer. Regional PS prices had been flat in March, as a slight increase in benzene prices wasn’t enough to move the needle on resin.
PS resin prices had fallen a total of 11 cents in January and February, including a 9-cent drop that had been pre-announced by PS maker Americas Styrenics.
Benzene prices jumped 51 cents per gallon to $2.59 in April and could see another 30-cent increase in May, according to Robin Chesshier, a PS analyst with RTI. PS makers are seeking an additional 6-cent increase for May in anticipation of this benzene hike.
PVC and PET up, but PP prices fall
North American resin prices danced to their own tune in March, with prices for PVC and PET bottle resin both up as polypropylene prices trended down.
Regional prices for PVC are up an average of 3 cents per pound since March 1, as improving demand was amplified by tightness in supply. The increase marks a change in direction for PVC pricing, which had been flat in February after falling for three straight months from November-January.
The January drop was 2 cents, meaning that the March increase leaves PVC prices up a net of 1 cent so far.