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Polyolefin price increase for sure

The following factors influenced “commodity” polymer prices and price expectations last week:

• BRENT oil price 7.59 USD/barrel, slightly dropping prices
• EUR/USD: 1.1693, EURO getting continuously weaker
• NAPHTHA: 666.82 Euro/t, slightly dropping prices
• Minor polyolefin price increases (by 20-30 €) last week,
• minor polyolefin pre-purchases,
• increasing olefin monomer prices
• Ethylene: C2 +63 € (1,150 €/t)
• Propylene C3 +80 € (1,032 €/t)

Olefin monomer prices, in spite of the fact that the increase by 50-80 € was to foresee as early as two weeks ago, was a surprise for plastic converters.  Most polymer producers have announced a minor price increase by 30-50 € as early as last week.  Yet further price increases are to be expected next week. These apply already to June. The price increases during the month did not shake the self-confidence of converters. There were only low, prudential quantities pre-purchased  There are two reasons for this: on one hand converters could further pre-purchase only at increased prices, and they think there can be no higher price increase than this one happening. On the other hand, their feedstock inventories are still pretty high. Now the big question is, how the market is going to react on the price increase. First price announcements are expected by Monday. Polymer producers come up with different strategies, depending on their inventories, and on the demand for the individual products. The critical product is LDPE, here all polymer producers are driven by the constraint not to take a further “spread” reduction any more. Therefore, compared to their prices early May, they should achieve a price increase by at least 65 € in June.  But the flexibility is low in case of HDPE, also here an increase by 65-70 € would be a must.  This is also supported by the short product supply. Because of the increase of the PP price converters are in a difficult situation. The PPH prices considered to be high also so far, permanently exceed 1,200 €, while in case of  PPC the price of 1,300, even in case of the cheapest product grades. 

The question for converters is how to approach the price increase. In particular as the price increases attempted so far have regularly failed bouncing off from the resistance of buyers and from the broad product availability.  Some converters are concerned by the fact that the second quarter of 2018 will end at the end of June and in their finished product supply contracts valid for the next quarter the June price will be of key importance.  Therefore a higher price in June might even come handy during the next quarter.  There are some, first of all PP converters, who think that they are no longer able to charge the price increase to their buyers, for them the increased use of offgrade and offspec materials can be the solution.

Probably, in spite of the slight price reduction of the naphtha and oil prices no monomer and resulting from this, no polymer price reduction can be anticipated. What is more, due to the weakening Euro, we rather have to anticipate high monomer and increasing polymer prices in June-July. In spite of this many converters will choose the “sit and wait” strategy during the first week. They will try to break the rate of the price increase.

According to our preliminary information polymer producers prepare for a similar price increase. The question is only, whose courage will first vanish because of the expected resistance of converters and start price correction?

Polyolefin grades

Last week even the LDPE producers of the southern region increased their prices, bringing a part of the June price increase forward.   The typical price range (price delivered) was 1,120-1,230 €. Now the further price increase by 30-40 € is added to this.  In this way the prices offered early June will be by 60-70 € higher than those early May.  We expect prices offered to be in a range of 1,150-1,280 €/ton.  Because of the expected resistance of converters the minor price correction will move average prices downwards within the price band.

HDPE demand is still high, also here there was a price increase by about 30 € during the month.  The price range is 1,150-1,250 € depending on the grade and application area. A further price increase by 30 € is to be expected early June.  As availability is short, therefore this price increase will probably be fully accepted on the market. This means a price range of 1,180-1,300 €/t in June.

HDPE (100) pipe prices will increase, because of the season and the short supply, by 70-80 € in June, at a rate exceeding monomer prices.  The expected price range will be 1,400-1,540 €/t.  No price correction is to be expected during the month.

The price of LLDPE C4 will basically not be determined by the European monomer price.  As Europe is a net importer of this material, in this way, first of all, the change of the exchange rate and the market prices outside of Europe will determine the price. Fact is, also in Poland, prices started climbing. Prices reached a price range of 1,100 – 1,180 €.   Taking the expected further weakening of the Euro into consideration, a price increase by 20-30 € is probable in June.

After the price increase of mLLDPE by 30-50 € in May, in June a further price increase by 20-40 € can be expected.  We expect price ranges to be 1,290-1,400 €/t, depending on the grade, producer and application area.  

PPH demand was very good also last week after the price increase by 30-50 € during the month.   The lowest producer prices were at about 1,180 € in the region.  The price range of PPH IM grades is 1,170-1,260 €, depending on the grade, producer, application area and melt index.  CE polymer producers wish to come up with a price increase following monomer prices. In this way prices will clearly by higher than 1,200 €.  Only WE producers with high present-day inventory level will implement a minor price increase by 60-70 €.  The typical price range is expected to be 1,220-1,330 €, depending on the grade, producer and application area.

On the PPC market buyers kept waiting.  There were almost no pre-purchases. The monomer price increase by 80 € caused a major surprise.  PPC was offered in a range of 1,250-1,350 €/t in Poland last week.  Prices vary within a range of 1,300-1,350 € in the other parts of Central Europe.  As PPC availability is extremely good, in this way the chances of a price increase following monomer prices are low, rather a price increase by 60-70 € is probable compared to the early May prices.  The typical price range is expected to be 1,290-1,440 €/ton in June in the region, depending on the grade, producer and application area.

On the PPR market the price range is 1,310-1,400 €.  Supply and demand are balanced.  Buyers who kept waiting so far will pay by 60-80 € more than the early May prices.  We expect the typical price range to be 1,340-1,440 €/t, depending on the grade, producer and application area.

The prices of the last week are presented in the table below (full truck load 20-22.5 t):

Polystyrene grades

On the day when the report was written styrene monomer (SM) prices were not yet known But the almost 6% benzene price increase forecasts an SM price increase by 40-60 €.

EPS demand is still moderate.  There were no significant pre-purchases because of the expected price increase.  The typical price range is still 1,500-1,620 €/t.  In case the demand does not grow significantly, even a price increase following monomers is a question mark. Plastic converters still keep waiting, in this way the maximum potential price increase is 40 €.  In June the probable price band is expected to be 1,520-1,660 €.

The demand for GPPS and HIPS was moderately weak last week.  PS grades with favorable prices from Iran, Russia are missing on the market. The European price range of GPPS is 1,350-1,440 € and in case of HIPS prices are in a range of 1,390-1,530 €/t.  By June producers will be able to enforce the monomer price increase only.  Only a slight increase of the import is probable.