Polyolefin prices slump on weak demand and rising imports

In June, a combination of weak demand and improving supply led to a further decline in European standard thermoplastic prices, despite little change to monomer costs.

Polyolefin prices saw the biggest price reductions. Polyethylene and polypropylene price developments bore no relation to monomer cost settlements. The ethylene reference price settled at a rollover with propylene settling down by €10/tonne. LDPE prices fell by €170/tonne, LLDPE prices fell by €150/tonne and HDPE prices were down by €150/tonne. Homopolymer and copolymer PP prices declined by €200/tonne.

Polystyrene prices either rolled over or fell slightly after the styrene monomer reference price increased €16/tonne. It was a similar picture for base PVC prices, while flexible PVC compound prices fell as a result of lower plasticiser costs. 

PET prices turned upward in June following a rise of €75/tonne in the paraxylene reference price. However, a growing volume of cheaper imported material limited price increase to €40/tonne.

Demand weak

In June, polyolefin demand was particularly weak although other polymer classes also experienced lower sales volumes than would normally be expected. Converters took a cautious approach given growing economic uncertainty, soaring energy costs and rising inflation. Buyers were also holding back from making additional purchases as prices were widely expected to drop further in July.

The construction sector boom appeared to be flagging while the automotive sector remained weak. The economic uncertainty also weighed heavily on packaging and consumer goods markets. The beverages sector, on the other hand, saw a surprise demand upturn in June.

Supply improves
The supply situation has improved across all product sectors since early summer as several production plants are now back on stream following outages. In the polyolefin sector, most production facilities are operating without interruption. While a number of PVC and styrenics production plants were not fully operational, there was sufficient material available to meet the low level of demand.

Local supply was supplemented by a growing volume of competitively-priced imported material across most product classes.

A selection of the latest supply-side developments in polymer markets are summarised below;

•  Covestro declared force majeure for styrene on 4 July due to the breakdown of the production plant jointly operated with LyondellBasell in Maasvlakte, the Netherlands;
• Borealis declared force majeure 5 July for cracker products from Stenungsund, Sweden. Borealis cited a technical issue as the reason for the outage;
• The damage to the OMV refinery in Schwechat, Austria, is much more serious than initially assumed. A complete restart and full utilisation of the refinery can only be assumed for August or September 2022. It remains unclear exactly what this means for the cracker, which is a key supplier of ethylene and propylene for polyolefin plants at OMV unit Borealis;
• TotalEnergies declared force majeure 21 June for EVA production at its domestic facility in Gonfreville, France.

July outlook
In July, polymer price trends are showing a mixed picture. Polyethylene and polypropylene prices are declining by triple-digits following respective reductions of €100/tonne for the ethylene reference price and €120/tonne for propylene. Polyolefin prices are under added pressure from imports and lower holiday season demand.

PVC prices are also coming under pressure from the ethylene cost fall and lower seasonal sales.

The styrene monomer reference price increased €155/tonne following higher ethylene costs and a surge of €386/tonne in benzene costs. Sellers are confident of achieving a small price premium over the SM cost rise.

PET prices are also expected to increase as paraxylene costs are rising sharply.

L/LDPE

In June, L/LDPE sellers did not follow the lead set by a rollover for the ethylene contract price. Instead, they were forced to allow prices to drop as a result of very low demand and improved availability. LDPE prices fell by €170/tonne with LLDPE prices down by €150/tonne.

Demand was extremely slack in June with L/LDPE film sales down sharply compared with the previous month. Economic uncertainty and inflation fears led processors to take a more precautionary stance.

Material availability continued to improve with most production plants operating in a normal manner. Meanwhile, a higher volume of imports started to appear in Europe from a wider range of sources.

In July, the drop of €100/tonne in ethylene coupled with lower holiday season demand and improving supply are likely to see prices falling at triple-digit rates,

HDPE

In June, HDPE prices tumbled for the second month in a row, despite a rollover for the ethylene contract price. Blow moulding, injection moulding and blown film product each saw prices falling by up to €150/tonne. Very weak sales and rising import volumes were the primary reasons for the further price reduction.

Demand was down sharply across the board as converters sat on inventories in the hope that prices would fall even further.

The supply situation has improved significantly in recent months; imports are more widely available and most production plants are operating without interruption.

This month, HDPE prices are once again under downward pressure following the €100/tonne reduction in the ethylene contract price. A combination of rising imports and even lower holiday season demand will likely see HDPE prices tumbling by triple-digit rates.

PP

Despite a reduction of €10/tonne in the June propylene reference price polypropylene prices collapsed sharply on low demand and improving material availability. Both homopolymer and copolymer grades registered a price reduction in the order of €200/tonne.

With most production plants operating without interruption and a growing supply of imported material arriving in Europe, there was more than enough material available to meet demand, and consequently producers’ inventories swelled.

PP demand was very low across the board with continued weakness of sales to the automotive industry and economic uncertainty weighing heavily on other sectors such as packaging and consumer goods. Converters ordered the bare minimum with prices expected to fall further.

The July propylene reference price declined by €120//tonne. PP prices are expected to decline by an even larger amount as demand falls further during the summer holiday season.

PVC

Following on from the first decline in base PVC prices for two years in May, base PVC material prices stabilised in Northern European countries but fell slightly in Southern and Eastern Europe. Flexible PVC compounds fell €40/tonne on lower plasticiser costs while rigid PVC compounds were stable.

While several PVC production plants continued to experience outages, there was sufficient base material available from both local suppliers and form imports to meet demand. PVC compound supply, however, remains rather tighter.

In June, demand was lower than in previous months as the construction boom cooled down and the automotive and film sector remained weak. Converters were also buying just sufficient material with prices expected to fall this month.

In July, PVC prices are likely to fall by more than 50% of the €100/tonne reduction in the ethylene reference price.

PS

In June, an increase of just €18/tonne in the styrene monomer reference price led to polystyrene prices either rolling over or declining slightly. Supply is improving while demand is low.

Polystyrene supply is improving with most production plants operating as normal following many months of plant outages. Hence, there was more than sufficient material available to meet slack levels of demand.

Converters are taking a cautious approach given mounting economic uncertainty and rising inflation. Many converters were calling off additional volumes in anticipation of even lower prices to come.

This article first appeared in Sustainable Plastics here.