Weaker rollover dominates polyolefins and PVC / Styrenics plummet / Clear reductions for PET / Demand remains very muted / Signs of feedstocks downtrending in July

PE: With only a few exceptions, a rollover dominated the picture for polyethylene in Western Europe in June. Reductions prevailed in segments with high imports. Although producers attempted to obtain margin gains, PE buyers were generally slow to place orders as they were expecting further reductions along the oil chain. The C2 reference for July fell significantly. Producers will endeavour to hang on to part of this reduction, although availability is returning to normal. On the demand side, further large purchases for stock are now unlikely because of the approaching holiday season.

PP: European PP producers were not always able to achieve a rollover in June, despite flat costs. Order activity slackened, as a reduction in upstream costs is expected in July. In the copolymer segment, many special offers were spotted. As the July propylene reference contract slid back by EUR 80/t, converters will be clamouring for rebates, while producers will try to pocket some of their price relief. In view of the long supply, converters are unlikely to buy any additional volumes. In supply agreements tied to the automotive industry, substantial reductions are expected.

PVC: Following the pattern for the ethylene reference, most contracts were settled at a rollover. Minor production problems in various corners of Europe were absorbed without any problems, especially since many customers were reluctant to make purchases in anticipation of falling prices, preferring instead to reduce their inventories. The European market has thus been uncoupled from the global increase in prices. All in all though, the price level here remains quite high. In July, producers will doubtless attempt to make good their margins once more, aiming not to pass on the full pro-rata cost reduction of EUR 37.50/t. However, their prospects of success are no greater than in previous months, particularly since the holiday season is beginning. Titanium dioxide producers will set out to gain clear increases for the third quarter. The price rise for the whitening agent ought to ensure that compound prices do not give way to the same extent as for suspension PVC. Plasticiser prices, by contrast, ought to undergo a further fall.

Styrenics: In June, styrenics prices in Western Europe followed the plummeting SM reference, which went down by EUR 143/t. For ABS, this effect was reinforced by decreasing composite costs (roughly EUR 100/t). Several producers at first tried to keep a part of the cost reductions. They only had limited success, however. For all styrenics, purchasers were quick to find other suppliers who offered them higher discounts in order to avoid an inventory build-up in the face of the weak demand. During the month, however, processors placed very few orders. First of all, this was caused by the general economic slowdown, secondly, by the holidays and long weekends and thirdly, by speculation about further price declines in July. Those who were betting on further discounts were probably right. PS and EPS prices are again likely to largely follow the SM reference, which has eroded by another EUR 48/t in July. ABS will also continue its downward trend, especially as butadiene has also become more affordable (down by EUR 50/t). Demand in July will probably benefit from the month’s high number of 23 working days. However, demand is likely to be dampened in many areas by the onset of the holiday season.

PET: Contrary to what had been hoped for, the first three weeks of June 2019 remained disappointingly cool and wet for the time of year. As a result, warehouses in the PET chain started to overflow at a large number of points. Processors were left sitting on some of their advance production and hence did not need to place any new orders. At the same time, increasing quantities of favourably priced imports from Asia flowed into the European market. Since the PX reference was settled at a considerably lower level at the end of May, European suppliers ultimately had to accept clear reductions in their PET prices too. European weather underwent an abrupt change in the last week of June, with high temperatures suddenly appearing over large parts of the continent. Warehouses started emptying out, and the season finally seems to be getting off to a start, but it is far from certain whether this summer weather is going to last. The PX reference for June gave way again, after spot prices had been pointing downward for a long time in June – which was also largely due to the weakness in PET. The direction in which notations are set to move thus remains relatively uncertain even though price pressure from other regions around the globe is continuing.

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