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Unclear price movements, converters keep waiting

The following factors influenced “commodity” polymer prices and price expectations last week:

• BRENT oil price 72.00 USD/barrel, increasing prices,
• EUR/USD: 1.2322, strong Euro
• NAPHTHA: 599.73 USD/t, increasing prices
• Increasing olefin monomer prices in April:
• Ethylene C2: +10 €/t,
• Propylene C3: +10 €/t,
• Decreasing SM price: -125 €/t
• Market still seeking reconciliation and waiting.

The season did not started the way expected. Sellers complain about this. Polymer producers have closed their order books last week. On the day when the report was written the typical demand in April was not yet known. For the time being it is hard to sell. Buyers keep waiting. In almost all segments. They build upon the technique proved in the second half of 2017. They procure the necessary quantities at the beginning of the month. Then they wait as long as the pressure on sellers is high enough and start decreasing their prices in the second half of the month. Prices, those of PE in particular, undergo continuous erosion. Both parties are losers in this game. Margins are shrinking both on the feedstock and converter side. Because of the long winter the demand for products used in construction and in agriculture does not correspond either to the preliminary expectations. March was weaker than expected in both segments. This has a negative effect on the production of agricultural film and twine as well. It is not easy to sell simple PPH Raffia products either and there is no profit for the producers either in the prices. This is well illustrated also by the shutdown of HIPOL last week. With the present polymer prices, it is impossible to produce with profit using purchased monomer.

Yet polymer producers are under a high pressure, as oil and naphtha prices have increased further also last week, therefore expectedly monomer prices will increase as well. In this way the pressure to further increase polymer prices is high. But with the present polymer oversupply this seems to be impossible. The reason of the oversupply is not only import from overseas, but rather the movement of goods within Europe. As because of the strong Euro the exportation possibilities of European producers are limited, they are forced to place their products on the European market. This is coupled with significant import from overseas (South-Korea, Iran) and the ever increasing consumption of good quality recycled materials. This is taking shape first of all in case of PE in the form of dropping demand for and reduced prices of “virgin” polymer grades, resp.  On the PP market the situation is a bit better, oversupply is moderate, in this way a smaller price increase following monomer prices seems to be accepted in April on the market.

The significant (125 Euro) monomer price drop had an impact on the PS market. Converters would like to have the same, in certain fields even higher price reduction. For the time being the demand for all three product grades examined by us is low.  The gap between European prices and import prices is closing.  This might, in case there will be no sudden SM price movements, balance the markets.

Polyolefin grades

There was a major LDPE price drop, the end-of-April prices taking shape are lower than at the end of March.   The typical price range is 1,100-1,140 € delivered, but bigger buyers get prices for bigger lots also below 1,100 €/t (delivered).  As the demand is low compared to the expectations and to the season as well, there is a high pressure on polymer producers to sell. For the time being their inventory level is high.  The shutdown of HIP-Petrohemija did not improve the market situation. In the second half of April the price range will get narrow, the upper range is expected to drop by 10-20 €.

In case of HDPE there is still relative shortage on the market.  The supply is short. But this is coupled with a relatively low demand typical for polyethylene grades. The initial price increase impetus seems to break in certain regions, the price increase by 20-30 € is not yet accepted on the market.  For the time being a price increase by 10-15 € seems to be probable.  We measured prices in a range of 1,080-1.150 € in the central and southern region as well.  Polish prices are still in a range of 1,050-1,120 €. The bottom of the price range was increased by 20-25 €.

In case of HDPE pipe (100) polymer producers officially would have wanted a price increase by 20-30 €/t.  In reality there was a price increase by 0-10 €.  The market is weaker than in January-February. At that time a part of the companies have bought in advance.  Also pipe orders were better. According to the polymer producers the sales in the first quarter correspond to the usual average.  The typical price range is 1,350-1,460 €. But larger converters reported also prices at or below 1,300 €/t as well.

LLDPE C4 prices started dropping, in particular in countries with high consumption.  In Poland the typical price range is 1,040-1,090 € and 1,080-1,150 € in the other countries of the region.  Supply is good and broad.

MLLDPE showed surprising downward price movements.  The typical price range is 1,220-1,260 €.  But materials from South-Korea are to have in Poland at prices starting from 1,200 €. What is more, the premarketing material of the large producer from the Middle-East is also offered at prices starting from 1,200 €.

PPH price reduction came to a halt.  But the price increase is not clear. At the southern producers (Rompetrol, HIPOL) there is no availability, the bottom of the price range is clearly higher than 1,100 Euro.  Seemingly an average price increase by 10 € was accepted on the market. The typical price range is 1,120-1,180 €, depending on the grade, application area and melt index. In case the relative shortage of goods persists, in the second half of the month a further price increase is possible.

PPC prices increased following monomer prices. Prices start at a level higher than 1,200 €.  The price range of producers in Central-Europe is 1,230-1,290 €/t, depending on the grade and melt index.  Also import prices will catch up on the higher price level. Demand for injection grades is good, yet the pipe market is weak. The lacking demand for construction products is palpable here as well.

On the PPR market a slight price increase by 10 Euro is typical.  The typical price range is 1,260-1,350 €.  Demand is not too high, after closing the order books during the week ahead the real demand in April will become visible. For the time being all grades easy to have.

The prices of the last week are presented in the table below (full truck load 20-22.5 t):

Polystyrene grades

EPS converters keep waiting.  For the time being the level of orders is low. European producer prices vary typically in a range of 1,650-1,700 €.  Yet converters would like to have price lower than this. The “sit and wait” strategy is enhanced by the fact that strong January and February on the pipe and other construction segments was followed by a weak March. In this way the constraint to buy is smaller. The pressure on polymer producers to sell is high, as further SM price drop is to be expected in May. In this way in the second half of the month it is possible that the present price range of 1,650-1,700 €/t will drop by at least 50 €.

In case of GPPS and HIPS also rather a price reduction following monomers was typical.  Price ranges are narrow, in case of GPPS the price range is 1,350-1,500 € while in case of HIPS 1,430-1,580 €.  Now importers are in trouble, as the usual price advantage seems to disappear. Some importers try to get rid of their inventories, as they are afraid of a further price drop in Europe.