Weekly commodity price report

The market is still waiting

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

• balanced demand in Europe, good autumn season in Central-Europe
• BRENT oil price 55.62 USD/barrel, it is increasing
• EUR getting stronger, EUR/USD: 1.1735
• plastic converters sit and wait,
• the price of ethylene, monomer increased by October (+30 €/ton),
• SM price decreased (-110 €/ton)

In detail

In September the October price increase was sure. Converters have purchased smaller quantities in advance, while polymer producers adapted their prices to the demand by price increases during the month. The price increases were facilitated by the uncertainty due to the American hurricane season, and also by the autumn season starting with a high demand. Plastic converters reported about a high volume of orders, but early October made them rethink the purchasing strategy of the last quarter. Now feedstock warehouses are full of inventories from September. Now the question for plastic converters is the tendency of prices during the last quarter. The question is: is it a good idea to buy a lot in October? Or shall they expect dropping prices as of November, and therefore reduce their purchases in October?

In a strange way demand in October will be determined by the November price expectations. This in spite of the fact the final October prices are not yet fixed. Now the public opinion is that November will bring at least roll over or a minor price drop by 10-20 €. In this way for those whose warehouse is full, it is not expedient to buy, they should rather get prepared for the dropping price tendency to be expected during the last quarter. 

Two important factors influence October prices. Buyers with contracts for annual quantities try maximizing their bonuses and fulfill their contractual obligations. This enhances demand.  But on the other hand this is also reducing prices, as the feedstock purchased is resold in some cases, thus conveying also a part of the bonuses. Another important factor is that traders from Western and Central Europe appear with high quantities of cheap materials on the Central European market. It is surprising that in most cases this is material produced in Europe, purchased during August-September. Regrettably the mistaken practice of polymer producers, namely that they sell the materials not sold during the last weeks of the months in big lots to traders in order to handle the lack of demand strikes back with increasing force. Therefore there is much cheap polyolefin from Europe on the market. The traders who offered their inventories on the price level of the last month, have quickly sold them last week. Such goods supply gives plastic converters the possibility to wait, thus they are able to retain the efforts of polymer producers to increase prices.

The price of styrene monomer dropped dramatically in line with the expectations (-110 €/t). But this was no surprise, this year already the second volatile price wave unfolded. This makes the market extremely uncertain. The restart of the plant of Versalis in Százhalombatta can stabilize the supply on the market, both in case of EPS and GPPS.  European polymer producers try to retain the steep price reduction. They do not convey monomer price reduction to their buyers. But the market is extremely unsatisfied with this policy. More and more turn to feedstocks from Iran, Egypt and Russia. And the substitution of PS grades has started. Converters started turning to less volatile feedstocks (PPR, PET) that can be planned better.

Polyolefin grades

Last week WE polymer producers tried to increase LDPE prices by 50-60 €. Central Europeans followed a mixed strategy.  There are some who waited and have not changed their prices yet. But most increased their prices. The increase was 30-60 € compared to the price level of early September. Polymer producers will be forced to decrease prices because buyers are waiting. The most probable rate of the price increase in October will be about 30 € compared to the prices of early September. The converters who are bound by bonus contracts, will be forced to pay the higher price, but they will expectedly reduce their purchases to a minimum.

Also in Poland producers increased prices by 50-60 €, but they quickly reduced the prices to a price level close to that of monomer prices.  The prices of BOP are not yet final, expectedly the price increase realized on the market in October will be lower than the price change of ethylene monomer. The typical price range is 1,250-1,280 €.

In case of HDPE there is also a pressure to increase prices, the strategy of producers is similar to LDPE. But here demand is still weaker. There were not many orders and purchases last week. The market is clearly waiting. It seems to be clear that the limit of the acceptable price increase is up to 30 €. But in the SCE region we measured a price increase lower than this (+0-15 €). The typical price range in Poland: 1,050-1,130 €/ton, depending on the grade. In the other parts of Central-Europe the price range is 1,060-1,180 €.

In spite of entering the autumn main season, the HDPE pipe prices could increase with the monomer only based on the experiences of the first two weeks.  Though polymer producers would have wanted more, converters were not willing to accept more.

The LLDPE C4 supply can, in spite of its shortage, not force big buyers to accept a price increase exceeding monomer prices.  One of the reasons is that traders are still able to supply significant quantities at price at about 1,200 Euro. In this way big buyers can buy in a range of 1,185 -1,215 €. The question is, for how long cheaper inventories will last? Expectedly in the second half of October there will be no longer prices lower than   1,200 € on the market. The producers who increased prices to an extent higher than monomer prices, offer their product in a price range of 1,230-1,260 €. At this price it is easy to buy.

mLLDPE supply is short, but the companies are flexible in terms of prices. The resistance of the individual buyers easily brings the initial price increase by 60-70 € to a halt.  In this way the accepted rate of the price increase will be probably 30-40 €/ton. The typical price range is broad, 1,280-1,360 €.

PPH demand is good and October will be probably good according to the forecasts. Therefore prices can increase both in case of Raffia and IM grades.  Polymer producers try a price increase by 40-60 €. Prices are not yet clear-cut for October, according to the reports from the last week it was possible all over the region to buy PPH within a price range of 1,130-1,220 €, which corresponds to our forecasts.  But due to the cheaper prices expected for November a slow price erosion is possible in the second half of the month (-10-20 €/ton).

On the PPC market the effect of traders are palpable. They were at ease selling in a price range of 1,220-1,240 also last week.  CE prices offered by producers are within a range of 1240-1330 €/t, but the flexibility is high in the price negotiations.  In this way typically only monomer price increase could be realized in the transactions.

PPR demand is good, the typical price range is rather broad, 1,300-1,390 €. For the time being prices cannot be regarded final, the final price level is expected next week.

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

Polystyrene grades

Polymer producers tried to curb volatility. All this means that they selectively “apply the brake pedal”, depending on the grade and just partially or not at all convery the SM price drop.

In case of EPS October brought the worst scenario for converters.  Steep SM price reduction and roll-over in case of polymers. All this means a margin increase by 110 Euro for EPS producers. There are low chances for the situation to come back to normal, only a price correction by 10-30 € can be assumed in case of „white” grades. In case of “Grey” grades the substitution of grades from outside of Europe could already play a role, but the import supply is very limited.

GPPS supply is broad.  European producers have foreseen a price reduction by 50 €, this means a price range of 1,360-1,500 €.  But also import supply from outside of Europe is broad.  In the southern region goods from Egypt are available at prices of about 1,280 €.  But GPPS from Russia and Iran is cheap and available as well. The situation is expected to be clear next week, but the extremely broad price range exceeding is probable to remain.

HIPS supply is still short.  Similarly to GPPS European producers have foreseen a moderated price drop by 40-60 €. The proposed price range is: 1,500-1,620 €. But Iranian import HIPS is available starting from 1,400 €. The price situation in October will be clear also as late as next week. At any rate buyers would like to have a higher price decrease. In case of HIPS and GPPS they will probably also achieve this.