Overview
The combination of high inflation and stagnant demand is causing serious economic issues for polymer producers. The high inflation element includes energy, feedstocks, logistics, regulatory and labour costs. Economic stagnation is a global situation which is affecting polymer demand in all parts of the world, where too much polymer is chasing too little demand. The current circumstances are a marked contrast to this time last year, when already high pricing resulting from demand in the Covid-19 period, the Russian invasion of Ukraine caused the price of most polymers to inflate to record highs.
‘Stagflation’ is influencing the complete range of polymer types including polyolefins, styrenic based polymers and engineering polymers, with only styrenic polymers benefiting from a reduction in the feedstock element of variable costs in March.
With stable or falling prices there is little incentive for polymer converters to increase inventory levels beyond the bare minimum, particularly as the global economic difficulties result in a greater tendency to hoard cash, rather than tie up liquid assets in inventory or capital equipment. This phenomenon tends to keep demand at a low level and does nothing to push the supply/demand balance back in favour of the polymer producers.
So where is the exit for polymer price stagflation? Barring a major geopolitical event, then through a combination of capacity rationalisation and/or demand recovery market conditions will reach a tipping point where the sellers regain control. Typically, there tends to be an overshoot in which the balance tips significantly in the other direction with the consequence of restricted availability and burgeoning demand as polymer converters rush to secure inventory before prices go up further.
The current expectation is that the existing market conditions will persist through the remainder of Q1, with the likelihood that producers will test the market fundamentals from the start of Q2; the results of which will be determined by the market.
Monomer Price Movement
Feedstock
Change (Contract)
C2 (Ethylene)
£26.59
C3 (Propylene)
£26.59
SM (Styrene Monomer)
-£100.15
Benzene
-£0.89
Brent Crude
£4.10
Exchange Rate
1.13
Mike Boswell
Managing Director – Plastribution Group
Oil Prices
No Data Found
Exchange Rates
No Data Found
UK Economic Data
Topic
Item
Date
Change
Trend
GDP
Real GDP (Q on Q)
Q3 2022
£556,856
UK Output
Manufacturing Index
Q3 2022
102.7%
Sales
New Car Registrations (Y on Y)
January
14.7%
Sales
Retail Sales (Y on Y)
October
114%
Labour
Unemployment Rate
September – November
3.7%
Prices
CPI (Y on Y)
December
10.1%
Prices
RPI (Y on Y)
December
13.4%
Interest Rates
Bank of England Base Rate
February
4.00%
Polyolefins
March saw most Polyolefins continue their upward price recovery with another monomer increase of €30 / MT for both C2 and C3. There was some variability with LDPE too well supplied to achieve any kind of increase. However, HDPE and LLDPE saw increases above monomer due to tightening supply with a lack of imports from USA and Middle East. PP was also stronger than in recent months with improved demand and low operating rates from European producers.
Outlook for April is a mixed with some reports that demand will pick up and keep prices on the upward trend whilst others suggest a more balanced picture leading to rollover pricing. There are too many global factors in play to make any kind of concrete conclusions with recovery of the Chinese economy being a key factor in supply and demand balances.
USA produced material has seen limited exports as domestic demand and pricing improved and many Middle East producers are either in or about to start maintenance periods. Grades that we rely heavily on imports for (LLDPE and HDPE) are potentially going to see some tightness for a few months.
Ian Chisnall
Product Manager – Polyolefins
Polyolefins Feedstocks
£/Metric Tonne by month
No Data Found
LDPE
Supply
Demand
LDPE pricing rolled over in March after some very short-lived attempts at a monomer increase.
Even with reduced output rates, LDPE supply is more than enough to meet demand and deals are available to spot buyers.
LLDPE
Supply
Demand
C4 LLDPE increased by £30-50 / MT as supply tightened a little with reduced imports. C6 LLDPE & Metallocene grades rose in line with monomer around £25 / MT as supply and demand were more in balance.
HDPE
Supply
Demand
HDPE also saw increases of £30-50 / MT as supply tightened and in some areas such as pipe extrusion, demand increased strongly.
In some cases, producers with low stock levels asked for £75 / MT increases as they managed demand with a strong pricing approach.
PP
Supply
Demand
PP pricing increased by £30-60 / MT and unlike PE that saw all increases confirmed early, has continued to increase through the month as supplier confidence grew.
PP demand is seen as stronger with some market sectors starting to show signs of recovery and growth. Many European producers are running plants at reduced rates to keep supply restricted and more in line with demand.
Other Polyolefins
EVA pricing rose roughly in line with monomer as there is some tightness in the European market. Speciality POP grades moved up in line with monomer.
Styrenics Feedstocks
£/Metric Tonne by month
No Data Found
PS
Supply
Demand
In February, Styrene Monomer showed a small increase of €10/T, and PS producers are generally applied this. Supply and Demand were balanced, albeit both at low levels.
SM availability has increased in March, as 2 EU SM plants come back on line, driving down SM by €113/T. At least some of this will be passed on in PS pricing, but producers will try to hold on to as much as possible in an attempt to cover increasing production costs.
ABS
Supply
Demand
February only delivered a small change, (SM +€10/t, butadiene Rollover, ACN +€41/t) and generally prices rolled over. As expected, demand improved slightly as converters began to restock. On the supply side, far eastern materials showed signs of possible increases.
For ABS in March, EU prices fell as composite raw material costs fell (SM -€113/t, butadiene +€30/t, ACN -€60/t), while Asian imports rolled over. EU ABS output is throttled to match demand, but availability is still plentiful. Slowing activity in the Automotive sector is likely to cool demand.
PC/ABS
Supply
Demand
As usual, PC/ABS price is following the trend of ABS.
Other Styrenics
SAN and specialities such as ASA and SMMA continue to follow the price trend of ABS.
Engineering Polymers
Sharron Jarvis
Product Supervisor – Engineering Polymers
Engineering Polymer Feedstocks
£/Metric Tonne by month
No Data Found
PA6
Supply
Demand
Cheaper imports are eroding prices further and with demand weak the supply chain seems more than adequate to fulfil orders. European plants continue to cut back production to try to stabilise the price and balance the market.
PA66
Supply
Demand
A similar situation to PA6, weak demand from the market and cheaper imports putting pressure on prices, no changes on the horizon.
POM
Supply
Demand
Low demand and cheap Asian imports continue to put pressure on pricing and the supply chain.
.
PC
Supply
Demand
Demand remains weak with few orders in the system, and customers only calling off immediate requirements at short notice. Inventories are full and there are still cheap imports arriving from Asia which will keep prices low.
PMMA
Supply
Demand
Imports from Asia continue to put pressure on pricing, it is expected that European producers will have no choice but to lower their prices into quarter two to try and keep market share.
PBT
Supply
Demand
Cheap imports and weak demand continues to erode prices no real changes expected in the short term.
Other Engineering Polymers
The situation for other engineering grades remains complex, most materials are reducing in price, and we are seeing greater availability from imports.
