Price Reports Abstract December 2011

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Standard Thermoplastics in December 2011: Notations still tending soft / No more bargains for polyolefin buyers / Supply nearly balanced again / Demand robust / Rising costs to drive January notations

European buyers of standard thermoplastics went on a shopping spree in December 2011 and found moderate price bargains for all polymer products. Among the olefins, ethylene (C2) fell by a further EUR 15/t against November, while propylene (C3) dropped by EUR 18/t. The monthly styrene (SM) contract reference price, by contrast, showed a “technical” rise of EUR 6/t due to an unfavourable dollar-euro parity. For polyethylenes, converters managed to secure rebates twice the size of producers’ cost reduction, and buyers of PP won concessions of around EUR 25/t, exceeding the cost reduction for C3.

Despite initial strong resistance from the polymer side, a long PVC market eventually netted buyers a rebate of EUR 25/t and pressured producers’ margins even further. With the cost base firmer, there was little price relief for buyers of styrenic polymers. Although there were some reports of rebates of up to EUR 20/t, PS finished the month in a weak rollover. EPS stabilised at the November level, with only prices for small volumes and more specialised grades showing slight declines.

Business generally slows in the final month of the year, as the building season ends and converters begin clearing inventories, but demand for many polymer products nevertheless remained quite buoyant this year. The plentiful supply of cheap material tossed onto the market by inventory-clearing polyolefin producers in November had largely dried up by December, even if a surprisingly large number of special offers for PVC were still around, despite the many export inquiries. The picture for PS and EPS was marred by delivery constraints. Attentive buyers in the end markets also quickly got wind of the fact that petrochemical feedstock prices were turning around. Buyers of packaging materials were keen to snap up bargains while they could. Inevitably, converters were forced to refill polymer stocks – which had the pleasant side-effect of a higher year-end bonus.

In reaction to the deteriorating economic background, the oil industry shuttered refineries, which inevitably led to cutbacks in petrochemical output and subsequently polymerisation. Even during the big clearance sales of November, it was apparent that changes were afoot. The weak euro also burdened producers as most feedstock prices are calculated in dollars. Despite stable oil and naphtha notations, prices for ethylene (up EUR 40/t) and propylene (up EUR 20/t) rose shortly before Christmas, immediately prompting calls for triple-digit hikes for PE and PP.

Styrenics producers are still waiting to announce hikes of their own. Although at press time the SM contract reference price had not yet been determined, it was expected to rise, with the extent a matter for speculation. Hard-hit PVC manufacturers were more moderate in their price targets, asking for increases of EUR 60/t in their quest to recoup lost margins. At least during the first quarter of 2012 polymer price hikes will be unavoidable, with the extent determined primarily by the development of demand.

For more than 34 years, PIE has been an invaluable source of information for European plastics industry decision makers - a quick, yet in-depth look at the development of plastics markets and polymer prices. Available online 24/7 and as a printed newsletter twice a month.

Standard Recyclate December 2011: Prices slide again despite weak rollover for primary material and run on recyclate / Short month and high output limit stock-building efforts / Rollover likely despite high costs

Although the fall in virgin material prices slowed down a little, from mid-November to mid-December, standard recyclate notations in German-speaking Europe underwent a decline very similar to that of the previous month. Unbranded and off-spec material continues to affect transparent film recyclate notations, pushing them down by another EUR 40/t. As far as the less transparent rLDPE film grades (translucent / lightly coloured / dark) were concerned, only the dark grades ended the month worse off than before, sliding by EUR 25/t. The end to the building season capped prices for secondary LDPE extrusion grades by EUR 25/t, while injection moulding prices stayed put at November’s levels. Buyers of HDPE recyclate gained discounts of up to EUR 15/t, and those interested in rPP and rPS even pocketed up to EUR 25/t. On the purchasing front, only the price of highly transparent film scrap declined significantly.

Contrary to expectations, demand for most recyclate materials rose again in the first third of December. With most regrinding lines operating normally and sufficient stocks, suppliers were nevertheless able to meet their customers' demands with little delay. Even the self-administered insolvency of Germany’s SR-Schwarzataler Recycling (Eisfeld; www.schwarzataler-international.de) had not yet had any effect on the market when this report was written.

Fears that notations – especially those of translucent and lightly coloured rLDPE grades – could rise again in January led to another big end-of-year run. Other regrind material, too, was much in demand in view of the upcoming holidays. Having granted considerable concessions of late, come the new year, recyclers will be seeking at least a rollover. Should costs start spiralling again, they will need to revise their goals accordingly, one player told PIE. Nevertheless, all signs currently point to a rollover.

For more than 34 years, PIE has been an invaluable source of information for European plastics industry decision makers - a quick, yet in-depth look at the development of plastics markets and polymer prices. Available online 24/7 and as a printed newsletter twice a month. 

Polyurethane feedstocks in December 2011: MDI numbers capped at the top / TDI still pointing slightly downward / Polyols tending toward a rollover / Softer demand / Higher costs drive price hike initiatives

In December 2011, European prices for MDI were levelled at the top, TDI crumbled again slightly, and polyols tended toward a rollover. Upstream petrochemical numbers continued firming, adding to isocyanate producers’ cost bill. After its long downhill ride, benzene hit bottom in November and gained EUR 11/t in December. Almost all the Q4 decline for toluene was reflected in TDI notations at year’s end. The EUR 18/t decrease in propylene (C3) prices seemed to signal an end to cheaper polyols prices. Demand for polyurethane chemicals shrank significantly in December, as converters cleared inventories for the annual balance sheets. At the same time, the end of the building season led to reduced demand for MDI and rigid polyols. Steady automotive demand kept TDI afloat. All in all, despite planned or unplanned outages for isocyanates or aromatics, most orders could be filled on time.

With the first signs of higher production costs for naphtha and aromatics on the horizon, PU chemicals producers in December already had their price hike announcements prepared, just in case. Already on the table were increases of up to EUR 100/t for MDI and up to EUR 200/t for TDI. Market rumour has it that polyols producers will try to lift prices by as much as EUR 200/t in Q1 2012. Current economic forecasts suggest that inventory refilling will be modest in January, so that even with capacity cuts in place, producers still should be able to supply promptly. Converters paying low prices may face some upward pressure, but other buyers are likely to see December notations roll over.

For more than 34 years, PIE has been an invaluable source of information for European plastics industry decision makers - a quick, yet in-depth look at the development of plastics markets and polymer prices. Available online 24/7 and as a printed newsletter twice a month.

Engineering Recyclate December 2011: Stability prevails / rPOM follows primary material down slightly / rPP producers pass on cost reductions / Automotive suppliers begin end-of-year rallye / Rollover likely

With no significant reduction in the cost of primary materials at the end of the year, the engineering recyclate market in effect settled down between mid-November and mid-December. Regrinders were only willing to negotiate on certain rPOM and rPP-Copo compound grades and even then only if they had previously obtained their base material at reduced cost. In the end, the price cuts averaged EUR 25/t. Prices for recycled ABS, polyamides, PC and ABS/PC blends remained unchanged.

Disregarding the effects of the Christmas season, demand has been surprisingly strong. Nevertheless, interest in the base material waned, meaning there were sufficient quantities in the market in the last month of 2011. Regrinders were able to supply basic standard recyclate fairly promptly.

Ordering activity increased considerably in the first third of December, much to the industry’s surprise. Many car manufacturers planning to run their assembly lines between Christmas and the New Year took measures to ensure that their suppliers will keep them stocked up with the necessary components.

Despite the trend towards lower engineering plastics prices, recyclers do not expect any short-term advantages on their plastic scrap purchases. In order to preserve their slim margins, they are therefore refusing to pass on possible price reductions on the primary market. With the first orders for January now going through at December prices, it seems a rollover is the most probable scenario at the end of the year.

For more than 34 years, PIE has been an invaluable source of information for European plastics industry decision makers - a quick, yet in-depth look at the development of plastics markets and polymer prices. Available online 24/7 and as a printed newsletter twice a month.

PET December 2011: Notations slip again, but bottom may have been reached / More stability in Asia / Supply long despite output cuts / Demand still softening / Upstream costs will determine market's direction

After prices plunged by a double-digit margin in November 2011, European producers of PET packaging resins were able to staunch the bleeding in December as concessions were kept in line with the ongoing downturn in feedstock costs. The resins suppliers pocketed around half of the EUR 70/t slip for PX, and the EUR 83/t setback for MEG. The backslide appeared to come to a temporary halt in North America but further declines are expected. In the crucial Asian market, the price deterioration seems to have ended, as feedstock movements are now reversing and prices firming.

The clearly evident oversupply situation of November eased in December on the back of massive capacity cutbacks; however, demand remained soft. It is more difficult than usual to predict which direction the market will take in January 2012. Without any helpful clues, observers are assuming that not much change will be seen. In the end, PET prices will follow developments in feedstock costs, which were still not clear at press time.

For more than 34 years, PIE has been an invaluable source of information for European plastics industry decision makers - a quick, yet in-depth look at the development of plastics markets and polymer prices. Available online 24/7 and as a printed newsletter twice a month.

Engineering Thermoplastics in December 2011: Picture dominated by moderate falls / Production cutbacks coincide with subdued end-of-year demand / Costs likely to rise in January / Benzene takes a great leap

Although there were no big price cuts, buyers of western European engineering thermoplastics usually managed to win some kind of concessions from their suppliers in the last month of 2011. Only PA 6.6 and POM remained generally stable; all other polymer engineering materials saw their prices fall to some extent, at most by EUR 55/t. In most cases, the reason for this decrease was the continuing weakness of notations in the petrochemical feedstock chains.

At the same time and despite all the measures to cut back production, the supply situation eased. December once again was a month cut short by Christmas, and demand remained slack. Converters’ desire to end the year with "near-zero stocks" further dampened ordering activity. Working almost without interruption over Christmas and New Year’s, the automotive industry nevertheless kept business going.

While the end of the year may have been a fairly calm time for most players, buyers can already see the dark clouds gathering on the horizon in January. After all, notations for many petrochemical products have not only stabilised since the end of last year, they have also become much firmer. The price of benzene, the key starting material for many engineering thermoplastics, took an unusually long time to fix and, when the veil was finally lifted, the feedstock once again fulfilled its reputation for volatility. Shortly before this report was wrapped up, the reference price from two contracts was fixed about EUR 190/t above the December level.

This rise not only counters the slump in notations witnessed in H2 2011, which eventually bottomed out in November, it also plays into the hands of producers’ efforts to sit out the slack period through production cutbacks. They will endeavour in January to obtain at least a rollover if not even a minor increase. In February at the latest, many market players suspect prices will start climbing again – provided, of course, that benzene does not plummet again in a hair-raising roller-coaster ride.

For more than 34 years, PIE has been an invaluable source of information for European plastics industry decision makers - a quick, yet in-depth look at the development of plastics markets and polymer prices. Available online 24/7 and as a printed newsletter twice a month.

Composites/GRP December 2011: Resins lose a little more ground as the year ends / Upswing in petrochemical notations could reverse the trend / Roving and glass fibre come under pressure

As 2011 wound down, ortho resins prices lost a little more ground. In the short working month of December, declining petrochemical prices and slacker demand due to the Christmas holiday season for the most part prevented producers from pushing through the hoped-for rollover. However, the setback in notations in the second half of the year was not severe enough to compensate for movements in the other direction during the first six months. Averaged over 2011, resins prices gained 3.1% – in the first half the upturn was 12.5%.

Resins producers’ costs continued to sink in December, as they had in preceding months. While flat in dollars, the monthly styrene monomer reference price was a marginal 6% higher denominated in euros. By contrast, propylene notations dropped by 18% in December. Prices for phthalic acid anhydride – which are fixed quarterly – decreased by EUR 25/t over the course of Q4.

Which way will resins notations move in 2012? As the year kicked off, the price indicators were pointing clearly upward. At press time – parallel to rising naphtha and benzene – an initial styrene monomer contract reference price for January was agreed, EUR 120/t above December's level. Earlier, the benzene contract had been confirmed about EUR 190/t higher. Price increases for gelcoats and colour pastes also seem fairly certain, due to the titanium dioxide rally. Market watchers believe that the average price for TiO2 will almost double up to 2015, landing above USD 6,000/t.
At the same time, the upward momentum could be held in check by an economic slowdown, especially in southern Europe.

The euro crisis continues to generate uncertainty, and a quick fix does not yet appear in sight. Even Germany, which has been a pillar of strength up to now, is showing signs of weakness. If the sovereign debt crisis does not exacerbate, Munich-based research institute ifo expects growth of 0.4% in 2012 after 3% growth in 2011. There are indications that the automotive industry – one of the drivers of demand for composites and other polymer-based materials last year – may be moving into a lower gear. In the best-case scenario, the industry can expect to hold its sales and earnings levels steady in 2012, a report by the German IKB Bank says.

For more than 34 years, PIE has been an invaluable source of information for European plastics industry decision makers - a quick, yet in-depth look at the development of plastics markets and polymer prices. Available online 24/7 and as a printed newsletter twice a month.