The maximum remains the passing on of feedstock reference costs / Weaker market causes prices to often end up below / Feedstocks give way / Back to a downtrend in November

PE: With the ethylene reference for October going up slightly, most European polyethylene producers initially called for significantly higher price rises. However, these hopes were quickly dashed by the sluggish demand. Apart from that, buyers tended to hold back during the month because all the signs were pointing to cost reductions in November. At the end, producers were then able at most to pass on their extra costs, but in many cases did not even manage that. In some areas, the consequences of a fresh wave of imports from North America are being felt. The ethylene reference for November is EUR 30/t lower. Producers will find it very difficult not to pass on the reduction in full, and they will probably have to go a little further. It could be that the lower prices induce some buyers to purchase for stock, but the market generally has probably already run its course for the year.

PP: In October, European polypropylene producers did their best to hold margins at least stable. The palpably weak demand, however, sharply reduced volume sales. At the end of the month, the supply side had recouped only about half of its, albeit modest, cost rise. Notations for products that faced competition mostly saw a rollover. For buyers of PP compounds, the minimal cost increase did not have much of an impact anyway, as the automotive economy had already stalled. The propylene reference for November declined sharply. As demand is providing no noticeable impetus, producers will have no choice but to pass on their cost relief in the next round. Rebates for competitive standard thermoplastics could well be higher than the reference price decline would suggest.

PVC: Proportionately passing on costs remained the norm for the European PVC market in October 2019. Suppliers even had to grant slight concessions with rollovers in some areas. These slight margin losses are painful for producers primarily because the situation for their co-product caustic soda is anything but rosy. Looking at adjacent polymer segments, however, they are probably still among the luckier ones, because at least demand from the construction sector appears somewhat unaffected by the current economic downturn. As a result, a number of processors are planning normal, if not exuberant, purchases in November. Proportionately passing on the now even lower cost reference for ethylene will remain the benchmark. The prospects for December are the most likely cause of worry lines for producers.

Styrenics: After two months on the increase, styrenics prices in Western Europe trended down again in October. The SM reference contract declined by EUR 21/t and, once again, set the trend. Producers’ attempts to keep styrenics prices stable to recover their thinned-out margins were largely unsuccessful. They generally had to pass on the full cost reduction and in some cases, the reductions even exceeded it. In view of the economic slowdown, demand remained subdued – even for EPS insulating materials, where the volume calls were rather meagre for the supposed peak phase of the construction season. With ABS, oversupply pushed some suppliers to offer volumes at favourable prices under the condition that they would be delivered in the short term. However, many processors deferred volume calls because they were speculating on further price declines in November. The recent decline in the styrene reference has proved them right, because styrenics are likely to follow the SM decrease of EUR 65/t, especially as the prevailing oversupply rather strengthens the purchasers’ side in negotiations.

PET: In October 2019 too, European PET prices continued to drift downwards. While rollover announcements emerged in isolated cases, reductions were ultimately also achieved for small volumes. These were of roughly the same order of magnitude as the decline in costs in September. Large volumes and spot offers are now below EUR 900/t in most cases, pulled down by even cheaper import offers of Asian origin and the ongoing tendency towards oversupply, despite a number of European producers cutting back output. High-quality regrind, which has experienced declining prices for many months, is thus once again considerably more expensive than primary material. The cost base for November still remains unclear. But even if paraxylene remains stable or firms in October, this will scarcely lift the pressure on PET notations. The market situation is still trending highly liquid. Further price reductions can be expected in a bid to get business going at all.

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