Price Reports Abstract March 2012

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Articles: March 2012
Standards Thermoplastics Standard Recyclate Polyurethane Feedstocks	Engineering Recyclate PET Engineering thermoplastics Composites/GRP

Standard Thermoplastics in March 2012: Significant margin improvement for PE and PVC in Q1 / Stable costs keep PS and EPS in check / Scant supply improvement / High prices dampen demand / Fresh hikes in store

In view of the high prices for western European standard thermoplastics, converters cut back ordering activity quite considerably in March. Unfazed, producers announced increases of up to EUR 150/t for polyolefins and EUR 90/t for PVC. This was intended not only to cover the significant increase of EUR 86/t in the cost of ethylene and the EUR 90/t rise in propylene, but also to pad margins. With the cost base for PS and EPS stable, the proposed price hikes of EUR 40/t were aimed solely at widening margins.

Numerous production problems across the polymer spectrum in March created supply bottlenecks and helped producers push through a margin increase despite already high price levels. Due to a lack of alternatives, western European buyers had no choice but to swallow hikes of up to EUR 120/t for PE and PP. With a rise of EUR 65/t for PVC, producers succeeded in boosting margins by EUR 20-40/t across the board for all ethylene-based materials. In contrast, PS and EPS stagnated.

European ethylene supplies were disrupted by the stoppages in Moerdijk / The Netherlands and Cologne / Germany. Some PE production lines also experienced problems, but the dramatic shortage of VCM and PVC eased and a brief disruption in PS cropped up shortly before the end of the month. Only EPS remained free of supply problems – apart from maintenance turnarounds.

The generally high prices frightened off in particular buyers from the consumer hygiene and food packaging applications. Due to shrinking order books, some PE converters even shut down parts of production. PVC benefited from the approaching building season, but the spark for EPS was not yet ignited as many converters were still sufficiently stocked.

At the beginning of Q2, feedstock gyrations subsided considerably, although ethylene (C2) rose by a further EUR 40/t and propylene (C3) by EUR 50/t. Instead of the breathing spell hoped for by converters, polymer producers intend to resume their efforts in April to restore margins, in addition to passing on higher costs. One has called for an increase of EUR 150/t, but hikes announced so far average EUR 70/t for PE and up to EUR 75/t for PP. Producers of PVC have decided to seize the day and kick off the spring season with price hikes of up to EUR 125/t. Sellers of PS and EPS were waiting for a confirmed styrene monomer (SM) contract and had not yet made any moves. Indications are that SM will remain more or less flat if the renewed C2 increase is offset by a minor decline for benzene. An initial European benzene contract price for April is said to have been agreed at EUR 890/t (down EUR 37/t). In any case, all producers will naturally try to improve margins. Overall, business in April will be fairly quiet, but buyers will not be spared the occasional price increase.

PIE ST Chart March 2012

Engineering Thermoplastics in March 2012: More grades succumb to upward price trend / Output remains tight / Demand starts to soften / April price hikes could fall short of producers' expectations

As was to be expected, the spate of engineering thermoplastics price increases continued to spread in western Europe in March. With the exception of POM and PMMA, all other engineering plastics covered in this report have now been affected by the wave of feedstock price increases in Q1. Leading the field were ABS and PP, the same trailblazers as of previous months, which saw notations rise by as much as EUR 90/t. In the case of PC, PA and PBT, by contrast, the upper ends of the PIE ranges were the first to react to the price calls producers had announced with a view towards the start of Q2. Smaller volumes of more specified grades saw prices rise by up to EUR 50/t.

In an effort to tighten supply, producers had initiated several production cutbacks in Q4 last year, a strategy they continued to follow in 2012. However, they were seldom able to achieve much more than a balance with demand, which has turned out to be much more subdued than imagined. There are clear signs of a slowdown in the automotive sector, especially when it comes to the small and mid-size models earmarked for the euro markets. So far, the effects of this let-down have not been dramatic – especially as E&E continues to be lively in many areas – although it is forcing producers to lower their grandiose price plans to a more realistic level.

Among the olefins, April’s propylene notation rose by another EUR 50/t. Just as refineries factor in a margin improvement when setting the price of petrol, cracker operators, too, are striving for windfall profits coupled to the increase in oil prices in Q1. Often it is the very same players pursuing their all too familiar strategy. For good or for bad, those PP contracts tied to C3 will have to follow this rise. An initial European benzene contract for April was fixed at EUR 890/t, down EUR 37/t. Although production levels are likely to remain lower than last year, a look at the different world regions points to demand continuing to slacken as well, particularly in China. This will inevitably put a damper on producers' ongoing efforts to hike prices, which means that not all of them will be able to make up the reduction in margins they suffered in Q1.

PIE TT Chart March 2012 PIE ST and TT Chart March 2012

For more than 34 years, PIE has been an invaluable source of information for European plastics industry decision makers - a quick, yet in-depth look at the development of plastics markets and polymer prices. Available online 24/7 and as a printed newsletter twice a month.

PET March 2012: Price wave goes out like a lamb / Asian demand sputtering / Imports create volume pressure in Europe / Demand still sluggish / Zenith appears to have been reached

In the market for PET packaging resins, March went out like a lamb. The latest price wave crested and dissipated, and the trend now appears to be pointing downward. The first days of spring saw moderate price rises of EUR 25-30/t for the feedstock mix of PX and MEG, but producers were largely unable to pass the higher costs down the chain. Even if smaller customers were obliged to make a contribution to their suppliers’ higher feedstock bill, most notations rolled over or eased slightly.

With demand already sluggish, European PET oversupply swelled further with the arrival of cheap imports. Many converters had pre-bought in February and what’s more were facing slow demand from the end markets.

After their strong rally in 2011, Asian polyester markets have been somewhat depressed in 2012. Lengthening inventories of feedstocks PX and PTA as well as polyester fibre and increasingly PET are being reported. This trend is now pulling other regional markets downward. At press time, no feedstock contracts had yet been fixed, but the price barometer is quite evidently sinking. The fallout from this is likely to reach Europe in April.

Polyurethane feedstocks in March 2012: Seasonal influences spark demand / TDI producers see triple-digit gains, MDI and polyols up by single-digit figures / Producers will seek further margin gains in April

Prices of all polyurethane feedstocks rose in March against February. Driven by tightening inventories in the wake of maintenance turnarounds and higher toluene numbers in some regions, TDI showed the most obvious upward mobility. Here producers had set a Q1 goal of adding EUR 250/t and with March gains averaging EUR 125/t it seems the target has been achieved. MDI producers also stood their ground, and with a rise of EUR 60/t this month they, too, appear to have reached their quarterly goal. Polyols producers seem to have fallen short of the EUR 150/t rise they were seeking, with only EUR 65/t being added.

Supply of polyurethane chemicals was affected to some degree in March by maintenance turnarounds at major suppliers BASF, Bayer MaterialScience and Dow. There were also some lingering issues in the polyols segment resulting from the cracker output shortage at Shell in Moerdijk / The Netherlands. Demand was ramped up a notch by the mild weather, and the building industry began to gear up for the new season. Demand from the insulation sector was bolstered further by a sharp rise in the price of heating oil. Ordering by customers in the automotive, upholstery and bedding markets was brisk.

In Q2, PU feedstock producers will continue their price drive as they fear that input costs will go even higher. No hikes are on the table for TDI as yet, although it seems to be just a question of time. Polyols producers have officially announced increases of EUR 100/t but behind the scenes are believed to be pushing for double that figure. Supply appears to be tightening for some products and segments just as some application sectors are beginning to wake up from their long winter’s nap. This is likely to play into the hands of producers looking to improve margins.

Composites/GRP March 2012: Ortho resins make further slight gains / Demand more robust on the whole / Supply adequate/ Consolidation in epoxy segment / Glass fibre downswing has bottomed out

Among the main feedstocks for medium-reactive ortho resins, only propylene saw any upward momentum in March. Styrene rolled over. On the whole, production costs for resins were relatively stable. The rise was only EUR 20/t on average, with movement taking place mostly at the upper end of the PIE range. European notations for maleic acid anhydride (MA) also saw little dynamic, despite the force majeure at Sasol-Huntsman in Moers / Germany. The Q2 contract is not expected to be fixed before the end of April. As regards phthalic acid anhydride (PA), US producers are trying to improve margins but so far only one has announced an increase – of USD 0.03/lb. In Europe, the March PA contract added EUR 70/t after a EUR 100/t rise in February. This had little influence on ortho resins prices, however.

The upsurge in titanium dioxide (TiO2) numbers shows little sign of slackening. The latest price round, touched off in Asia, lifted notations to around USD 4,000/t on the international average. International consultancy TI Insight (Baltimore, Maryland / USA) recently forecast that the USD 6,000/t mark may be reached before too long.

There is not much more downward potential for glass fibre prices, whether roving, mats or short fibre for compounding engineering thermoplastics. Most distributors and buyers believe the price slide has bottomed out. Despite EU punitive tariffs, along with higher energy costs and shipping charges, Chinese material is still priced below European product.

Demand is springing to life everywhere, but the larger order volume is leading to no delivery delays, despite plans by Dow Chemical and Momentive to remove capacity from the market. This could be the beginning of a consolidation wave, observers say. Despite some reports to the contrary, automotive demand appears to be still stable if slightly below last year’s high level.

Medium-term developments in the wind energy market are causing worry among composites producers. In the US, the production tax credit of 2.2 cents per kilowatt hour is expiring. Experts also have forecast an end to the boom in Europe. Only Chinese demand is showing no signs of slackening. The “China syndrome,” in particular growing competition from that country’s large plant contractors and equipment manufacturers, could well lead to market consolidation if western producers can no longer stand up to the price pressure. Since 2008, prices for wind turbines have sunk by about 22% on average, according to Marcus Weber of the Roland Berger consultancy.

Standard recyclate March 2012: Primary market surge pulls secondary notations up / Double-digit rises for rPP and rPS / Slighter gains for rPE / Virgin polymer tight and expensive / Substantial hikes planned

From mid-February to mid-March notations for standard thermoplastic recyclate were pulled upward by the price surge on the primary market. The more intensive the price pressure from the input side, the greater the effort recyclers made to improve their margins. The PIE range for rPE products reacted to this push with a rise of up to EUR 25/t, while rPS and rPP moved up by as much as EUR 40/t. Some recyclate products that compete directly with virgin polymer saw triple-digit increases. As demand gathered strength in March after a frosty February, polyethylene recyclers were able to fill all orders, either from current production or reserves. By contrast, rPP and rPS suppliers were not always able to deliver on time due to the tightness of the primary market.

Buyer interest in rPE grades for the building and agriculture sectors increased steadily, but there was no hype. There were tough battles for access to the cheaper rPP and rPS products, however. The price rally in the primary standard thermoplastics market continued for the third consecutive month, driving input costs for recyclers higher. To recoup margin losses, they called for hikes of up to EUR 50/t. As virgin material is still limited, they may have good chances to meet their goals. The kick-off of the building sector after Easter also could play into their hands. Under these circumstances, buyers who plan to resist the higher prices will need a lot of luck.

Engineering recyclate March 2012: Secondary ABS continues to rise / Upward tendencies for rPA and rPC / rPOM and rPP compounds stay put / Production scrap increasingly tight and expensive / Price rises imminent

As was to be expected, by mid-March the engineering recyclate market in German-speaking Europe increasingly started to feel the pressure of the wave of price increases on the primary market. Wheras rABS and rPP prices already responded to the primary hikes last month, polyamide and polycarbonate recyclate is starting to rise now, too. On average, these increases saw the PIE range rise by EUR 50/t. Only rPOM followed the primary trend, remaining stable at a high level. To the surprise of many, rPP compound notations actually stayed put in March as all efforts to raise prices failed amid sufficient primary material alternatives. The protection afforded by quarterly contracts has yet to abate.

Even though there was enough recyclate to go around, all signs point to impending shortages. A clear indicator of a renewed price hike is the fact that production scrap has generally become tighter and more expensive. Equally typical of such situations is the livelier demand for recyclate. As primary notations rise, converters start to seek out alternatives, and frequently turn their sights to the secondary sector. For now, however, the situation is still under control.

At the same time, however, it should be remembered that primary producers still have to factor a sizeable portion of the feedstock cost increases into their thermoplastics prices. There are fears about a considerable upheaval at the beginning of Q2 when a large number of price agreements will be up for renegotiation. Not only will such a rise pull plastic scrap notations up in its wake, it will also likely trigger a significant rise in demand for regrind material. Headed into Q2, the engineering recyclate market will almost certainly follow the lead set by primary prices, which are bound to rise significantly.

For more than 34 years, PIE has been an invaluable source of information for European plastics industry decision makers - a quick, yet in-depth look at the development of plastics markets and polymer prices. Available online 24/7 and as a printed newsletter twice a month.

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Price Reports Abstract March 2012

Articles: March 2012