A downward trend in prices of thermoplastic that began in Europe in mid-summer, gathered momentum last month due to falling feedstock costs. From end-July to mid-November, Brent crude oil prices have now fallen by nearly 33%, ethylene and propylene costs have fallen by just over 13%, styrene monomer has fallen by less than 4%. The smaller decline in polymer feedstock costs is largely explained by limited material availability, as per europeanplasticsnews.com. Production cutbacks and stock reductions undertaken by producers in recent months has tightened material availability for polyolefins and have supported producers’ push to restrict price rebates and improve margins as costs fell. PVC and polystyrene supply is not quite as tight. While several crackers remain under maintenance, a couple of feedstock plants have resumed production. Imports are not currently a major factor due to the weakness of the euro against the US dollar.
In October, ethylene and propylene feedstock costs plunged by €90/ton following a sharp reduction in the cost of crude oil and naphtha. Buyers hoped to see prices crashing in line with feedstock costs, but their hopes were soon dashed. By mid-month LLDPE/LDPE and HDPE producers held price rebates to just over half of the cost reduction. PP homopolymer producers gave away price rebates of €60/ton while supply of copolymer grades were tighter and prices dipped by €50/ton. PVC prices fell by €35-40/ton as sellers tried to stimulate demand. General-purpose polystyrene prices stagnated after the styrene monomer contract price rolled over while HIPS fell slightly. A summary of the latest supply-related issues:
• The HDPE line at the Borealis site in Burghausen, Germany, with capacity to produce 175,000 tpa, was shuttered in October as previously announced.
• Lithuania's Neogroup has delayed the restart of a 160,000 tpa PET line at its Klaipeda plant until the end of November.
• Indorama's 418,000 tpa Rotterdam PET plant was due to restart mid-November and Equipolymers' 150,000 tpa Schkopau, Germany, plant was due to restart late November.
• Styrolution plans to close its polystyrene plant in Trelleborg, Sweden at the end of this year. The site in Trelleborg has a nameplate capacity of 80,000 tpa.
• Shell expects that production of propylene oxide, styrene monomer, ethylene oxide and ethylene glycols will have resumed at Moerdijk by the end of 2014.
• Due to as yet unspecified technical problems, Repsol declared force majeure for ethylene at its cracker at Tarragona on 31 October.
• After operating under force majeure at its German site for more than a year, Grupa Azoty ATT Polymers’ force majeure has now been lifted.
The larger buyers who have been waiting for lower prices returned to the market in November while smaller buyers tended to hold out for even lower prices. End-of-year bonus targets was another factor driving sales. The polyolefin sector saw the liveliest demand with food packaging sales leading the way. PVC pipes and profiles demand benefitted from the mild weather. Polystyrene and PET demand, on the other hand, remained slack. The drop in crude oil prices has pressurised naphtha prices, which has fallen at a steeper rate than petrochemical feedstock costs. However, once feedstock supply tightness eases, then an even steeper decline in feedstock costs is possible.