Weekly commodity price report

Price increase ahead in December, demand getting dynamic

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

• BRENT oil price 63.86 USD/barrel, it is increasing
• stagnating EUR, EUR/USD: 1.1931 getting weaker
• Naphtha: 573,37 USD/t, increasing
• demand is still low.

The polyolefin market shows signs of living up. Now it is clear also for converters that prices reached their deep point in November.  The further increase of oil and naphtha prices and the weakening of the Euro all in all mean monomer and polymer price increase for the market. In terms of polymers we are confronted with two scenarios: the integrated producers, who have a latitude because of the monomer produced by them have already fulfilled their sales plan for November. Mostly at the prices published at the beginning of the month, and to a lower extent in the frame of individual bargains. Other polymer producers who work from purchased polymer, are rather waiting for the demand. Demand seems to arrive during the last 2 weeks of November. Weakening Euro reduces the latitude of imported materials, making them expensive. All in all quantities causing supply-induced pressure disappear from the market. This is easy to see from the polymer prices correcting slightly upwards last week. Polyolefin prices seem to have hit their annual lowest point last week.  Because of the expected price increase the demand of plastic converters gets dynamic and will live up during the week ahead of us. Partially because of the usual pre-purchases preceding price increase, partially because some converters are already buying in advance for 2018. And they also try finding the cheapest prices. Many express their doubts in terms of the expected polymer price increase, as December is, because of the Christmas holiday, a short month with lower demand, at least in terms of normal buys. But because of the usual end-of-the-year, extraordinary pre-purchases the total demand is not low. Monomer prices will increase for sure, ethylene and propylene expectedly by 20-40 Euro/ton, while SM will probably increase by 60-90 Euro.  Polymer producers will certainly take the opportunity to increase prices, they will try to enforce the monomer price increase at least, and some even a higher increase. But during the second half of December shutdowns due to the holiday season will reduce demand and the prices as well. All-in-all, in case of the polyolefin prices in December we expect a “roll-over+” price increase.

The movements on the PS market will be determined also now by the dynamic monomer price change (60-90 €/t). The market seems to be the sacrifice of speculation again, as the season is close to its end. Only the price increase of the feedstocks (naphtha and benzene) which is not as dramatic as the planned SM price increase, is behind the price increase.  SM price increase is mostly supported by the assumed supply difficulties of the next future. But because of the end of the season it is not highly probable that PS producers could realize a major spread increase in addition to the SM price increase.

Polyolefin grades

The reduction of the typical LDPE stopped, inventories at a price lower than 1,150 € are sold out, the typical price range was 1,160-1,230 € (DDP) last week.  The cheapest prices - 1,160-1,200 - €/ton are typical in the southern region. For the time being demand is lowest here, polymer producers expect no significant dynamism on the local market. Significant increase of the demand can be anticipated in Poland and in the central region next week, steered by pre-purchases.

HDPE prices are still down. But there are deviations by the individual regions. In Poland, HDPE BM and FILM grades are available at prices below 1,000, first of all from import sources from outside of Europe. While the price of HDPPE IM grades remains permanently above 1,000 €/t. Cheapest prices start at 970 €.  In the central and southern region the price of FILM grades remained above 1,000 €, while the price of BM and IM grades came close to one thousand and even dropped below that.  Major regional producers eliminated their gross inventories in November. In this way they will start December with a “tabula rasa”. In December prices will expectedly be again above 1,000 all over Central-Europe.

HDPE pipe market is stable and so is the demand, the typical price range corrected a bit upwards, the range was 1,330-1,400 € last week.  A price increase following monomer prices is probable in December.

LLDPE C4 prices increased slightly, due to the Euro getting weaker.  The typical price range was 1,140 -1,170 € in case of large buyers and 1,190-1,240 € in case of smaller ones in Poland. In the other countries of the region the typical price range was 1,200-1,250 €.

 mLLDPE prices in the region increased also, the new price range was 1,250-1,300 €, cheap, smaller lots disappeared from the market. Polymer producers prepare for the December price increase.

On the PPH market the demand is still low.  But polymer producers did not allow their prices drop below 1,000 €. What is more, last week was already characterized by increased interest. Consequently the price flexibility of polymer producers dropped. In the region the typical price range was 1,040-1,160 €, depending on the grade and on the size of the buyer. During the week ahead of us we anticipate the demand to get dynamic and further upwards price corrections. In December the most probable price scenario will be „roll-over +” compared to the early November prices, and there will be a clear increase to the typical price level we had in the middle of November.

The PPC market has slowly but surely consumed the inventories of the polymer producers.  Polymer producers had it hard last week to give offers, their November inventories were sold out. Also traders were careful about their inventories. The typical price range did not change compared to last week, 1,150-1,220 €/ton, depending on the grade and application area. A price increase following monomer prices is expected in December.

The PPR market produced a significant upward correction last week, due to the dropping supply.  The bottom of the price range moved from the price level of 1,200 to 1,240 €/t, pushing also the upper level by 20 € up.  The typical trading price range was 1,240-1,300 € last week.  In December, producers will probably try to increase prices to an extent exceeding monomer prices.

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

Polystyrene grades

The season is slowly ending, demand slows down, but the short supply does not allow yet to reduce the prices. What is more, the expected SM price increase in December induces additional demand. But polymer producers and traders cannot supply the desired quantities to the buyers. And also import from outside of Europe is short on the market. Importers wait with their offers because of the weakening Euro and due to the increase of the monomer prices. In the first half of December we expect high demand with pre-purchasing intentions, as according to the forecasts we can anticipate permanently increasing SM price, short monomer and polymer supply. In this way pre-purchasing seems to be justified. But the question is the reliability of forecasts. A volatility similar to this year is much more probable on the market.

EPS demand is getting weaker, but it is still hard to buy.  At the present demand and supply are not yet balanced. For the time being we expect two silent months. The typical price range was 1,500-1,620 € last week, there were just a few deals made.

GPPS demand seems to grow stronger, supply is short. The massive presence of Iran at the end of October seems to disappear from the market, but for the time being traders also keep waiting. In the present price range (1,280-1,350 €/ton) they do not want to sell yet.  Assumedly the price increase expected by December will restart the markets.

The price range of HIPS was 1,310-1,400 € last week.  European products and import from outside of Europe as well are missed on the market. According to the converters traders and producers retain their inventories because of the price increase expected for December. We expect a price increase exceeding monomer prices.