Upturn in resin prices as market tightens in Europe
2018-12-21

The rising cost of crude oil led to producers raising prices

European standard thermoplastic prices turned upward in April following three months of declining notations. In most cases producers managed margin improvement by raising prices by more than the increase in feedstock costs. Their price drive was supported by firming crude oil prices, a tightening in material availability as a result of planned plant maintenance programmes and an upturn in demand at the start of spring.

LDPE prices registered gains of €65/tonne and LLDPE prices were €60/tonne higher compared with a €60/tonne rise in the April ethylene contract price. LLDPE availability was swelled by imported material. HDPE blown film grades settled close to the cost rise, while blow moulding and injection moulding grades registered small margin gains. Supply of blow and injection moulding material was tighter than blown film grades.

The polypropylene and polystyrene markets are tightening. PP saw price increases of €70/tonne across the board compared with a €60/tonne increase in the propylene contract price. GPPS and HIPS registered gains of €5-10/tonne over the €95/tonne increase in the styrene monomer reference price.

PVC saw price increases of €10-20/tonne more than the €30/tonne proportionate impact of higher ethylene prices on their production costs.

In March, PET producers made up for some of the losses they had recently suffered and also managed price increases ahead of the €70/tonne increase in their cost base. They took advantage of good seasonal demand, tight material availability and fewer imports.

Material availability tightened somewhat in April, although there was generally sufficient supply to meet normal demand. The plant maintenance season is however now in full swing with many crackers and polymer lines either currently out of action or about to be serviced during the second quarter. Some producers are now building stocks in anticipation of production outages.

There is a concern that the cracker plant at Aubette in southern France is experiencing start-up problems following a maintenance turnaround and may only be able to resume operations in May. Another cracker plant turnaround was due at Antwerp, The Netherlands mid-April.

In April, there were just two reports of force majeure:

? Total announced force majeure for all deliveries of PP, PE and EPS from the site at Feluy, Belgium 6 April. The force majeure was put in place following a regional strike by trucking companies which blocked roads in southern Belgium. Force majeure was lifted two days later.

? LyondellBasell announced force majeure for six polypropylene types at its polymer production facility in Ferrara, Italy from 13 April due to technical problems.

A ship carrying the first-ever cargo of shale gas-sourced ethane arrived in Europe from the US on 23 March. Ineos announced that the 27,500 cubic metres are to be used in its steam crackers in Norway and Scotland.

Order intake returned to normal levels after the Easter break. However, converters tended to purchase only sufficient material for their immediate production needs faced by such large price rises. There was the usual seasonal demand upswing for certain sectors including beverage bottles, building materials, agricultural chemicals and paints and varnish pots.

In May, polymer prices look likely to remain on an upward trend. Crude oil and naphtha costs continued to firm during the first two weeks of April, which could herald higher May feedstock contract price settlements. Material availability is unlikely to improve in the short term and the onset of spring should lead to a demand revival.

Read the full report here.