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Illusory roll-over

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

• BRENT oil price 60.44 USD/barrel, it is increasing
• EUR getting weaker, EUR/USD: 1.1609
• Naphtha: 518.83 USD/t, increasing price
• plastic converters expect price drop for November both in case of PO and PS.
• retained polymer demand,
• the spot polymer prices in the region last week showed a clear reduction,
• C2- ethylene, C-3 – propylene roll-over,
• The SM price is not yet known, but the drop is probable

In detail

In the light of the fundaments monomer prices should increase. The price of oil and naphtha is highest during the last one year, Euro is getting weaker that is feedstock purchasing costs are highest over the last year for monomer producers. In spite of this the price of C2 and C3 remains unchanged in November. But in case economic processes continue this way, then a monomer price increase in December cannot be avoided, which will result in polymer price increase in December.

But the reduced demand for polymer grades in October and price reduction expectations have basically set the direction of polymer prices. During the last week of October prices (HDPE, PPC and PPH) have started falling, as a kind of precursor for November prices. But the price drop did not increase the demand. Plastic converters sit and wait, anticipating a major price drop. As a result of the monomer roll-over several producers will come to the market during the first week of November with prices unchanged compared to the end of the month. A price reduction is probable only in case of the polymer producers who increased their prices “too much” early October and now, compared to their prices early October they are forced to reduce them by 20-30 € to bring them to the level of the market.

For plastic converters the roll-over will probably be not enough. They expect clear and significant price reduction (-20-50 €). For this reason they have cut back on their purchases in October. They will be disappointed. For this reason the first week of November will be very silent. Because of the dissonance between the expectations, fulfilled reality and threatening price increases. Polymer producers cannot reduce prices significantly, unless there will be a turnaround (decreasing price tendency) in oil and naphtha prices.

The question is whether plastic converters can still wait with their purchases? Big, continuously producing companies can certainly not wait, they are forced to buy. Medium-sized and smaller companies can still play the waiting option. But contrary to October they can no longer anticipate cheaper materials from traders. Because of the strengthening dollar they cannot expect cheap import either. In this way in November many will be forced to buy. What is more, if the price tendency will turn and price will start increasing, traders will buy more.

But for the time being there are still many assumptions. During the short week ahead of us we will see the first list prices of polymer producers, but the reaction of the market will be clear next week only.

The SM price is not yet known, but market players agree that the price shall drop, in line with the world market tendency. Market players expect a price drop by about 50 €.  All this allows the prices of PS produced in Europe to drop. This is particularly important in case of EPS, where the high feedstock price jeopardizes the demand of converters and the competitive edge of their products.

Polyolefin grades

The typical LDPE price range was 1,220-1,280 € (DDP) in the region last week.  There was a relatively low number of transactions at the end of October. Plastic converters expect dropping prices. But most probably prices will remain in a range of 1,220-1,280 € in November in case of polymer grades produced in Europe.  In case of polymer grades imported from outside of Europe also prices below 1,200 € are possible, but in the light of the overall Central-European demand this quantity is not significant.

HDPE demand is still very low.  The typical price range in Poland: 1,050-1,130 €/ton, depending on the grade. Prices vary within a range of 1,060-1,180 € in the other parts of Central Europe.  Regional producers try boosting the low demand by a price reduction (- 10-20 €).  The typical polymer producer price range can be expected to be 1,050-1,150 Euro in the region during the first week of November.

The typical range of HDPE pipe prices was 1,340-1,420 € last week.  No price change is expected. Partially because due to the shutdown of Borealis in Schwechat also the supply is lower in the region.

The typical price range of LLDPE C4 was 1,150 -1190 € in case of large buyers and 1,200-1,260 € in case of small ones in Poland. In the other countries of the region the typical price range is 1,240-1,320 €.  Because of the strengthening of the dollar, if the tendency will be permanent, price will move up. For the time being we expect roll-over and broad supply.

The prices of mLLDPE are within a price range of 1,250-1,350 €.  The lowest prices (below 1,280 €) are from traders. But slowly they also run short of their inventories. In this way the typical price range in the first week of November is expected to be 1,270-1,350 €/t. 

PPH producers could not wait for longer either, last week, in the southern part of our region prices dropped below 1,100 €, thus last week the typical price range was 1,080-1,200 €.  In Poland PPH Raffia grades imported from Iran are available at prices starting from 1,050 €.  But these prices did not generate a significant demand either, buyers would love to have further price reduction. The big question is whether the usual reduction of the demand at the end of the year will trigger a further price drop, maybe the drop of the cheapest prices below 1,000 €/t? We are of opinion that in November this is by no means going to happen.

PPC supply was broad last week, but buyers rather sit and wait.  In the region we measured sale prices in a range of 1,180-1,280 € last week.  The cheapest materials were feedstocks from outside of Europe (from Iran, South Korea), polymer grades produced in Europe are rather in a range of 1,230-1,300 €. Because of the dollar getting stronger we anticipate the import getting more expensive. In case of European products unchanged price, minor price corrections (reductions) can be anticipated.

The typical trading price range of PPR was 1,240-1,320 € last week.  Converting companies expect a clear price drop in November. But for the time being producers try roll-over. Price reduction is expected after the 10th only if the demand remains low.

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

Polystyrene grades

The PS market waits for the monomer and polymer price drop, in spite of benzene prices starting to increase again. The SM price drop in Asia and in North-America is in the background of the expectations. But the SM price drop will not reach the level of October, a price drop by 40-60 Euro is expected.

Also EPS buyers forced themselves to be calm last week, and try to wait until the price reduction early November, which will, according to our hopes exceed that of styrene monomer.  Also EPS producers show willingness for margin sacrifice, as the end of the construction season is at hand. The expected price drop will be SM-20-30 €. This can mean an EPS price drop by even 90 €.  The demand is good and is expected to remain like that until the end of the year, even next year. Converters will try to reserve, book corresponding feedstock quantities based on the experiences of this year.

GPPS demand was low last week.  Buyers were waiting for price reduction. Their price reduction expectations were also supported by the fact that the prices of goods imported from outside of Europe have dropped further, GPPS from Egypt was available in the southern and central part of Europe at prices starting from 1,250 €.  The drop of SM prices and the strengthening of the dollar will expectedly bring European and import prices closer to each other. We expect prices of GPPS produced in Europe in a range of 1,260-1,350 €, depending on the grade and application area.

HIPS demand was low last week.  Market was waiting for price drop here as well. The sign of the price reduction was that from the southern region very cheap offers at a price of 1,270 €/t for HIPS from Iran have been reported.  A price drop exceeding SM (-20-30 €/t) is probable in November.  In this way the price of HIPS is expected to be in a range of 1,320-1,440 €.