Tighter supply lifts prices across the board

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Supply tightened due worries about the after effects of Hurricane Harvey on European polymer supplies

In September, European standard thermoplastic prices resumed on an upward path following a temporary lull during August. Feedstock costs edged higher on the back of rising naphtha costs and growing supply concerns. Supply tightened across all polymer classes due to continued planned and unplanned plant outages and worries about the after effects of Hurricane Harvey on European polymer supplies. Demand also picked up as converters returned to work after the holidays.

As a result, during the first half of September, all polymer classes registered higher prices. The L/LDPE sector faced particularly tight supply and here prices increased around €20/tonne more than the rise in ethylene costs. HDPE prices increased in line with the €30/tonne rise in monomer costs. Base PVC prices also matched the proportionate impact of higher ethylene costs on the PVC cost base (+€15/tonne).

Polypropylene homopolymers registered price gains in line with the €40/tonne rise in the propylene contract price whereas copolymer grades saw higher gains due to product shortages.

The polystyrene sector was again subject to extreme feedstock cost volatility. Styrene monomer costs soared €190/tonne due to mounting supply concerns. Polystyrene prices largely mirrored the rise in feedstock costs.

While tightness in the PET supply situation has eased, a further rise in raw material costs lifted prices once more.

Supply tight

Polymer markets tightened during September due to a series of planned and unplanned cracker and polymer plant outages. About 9% of European ethylene's capacity or four crackers underwent planned maintenance in September to further tighten an already dry olefins market. Furthermore, 50% of US cracker capacity was offline and ports were shut in the wake of the tropical storm Harvey, which put additional upward pressure on European polymer markets.

In addition, many companies in southwestern Germany, France and Switzerland are facing major transport difficulties. A section of the railway line is closed for repair down in the Rhine Valley, between the German towns Rastatt and Baden-Baden until at least 7 October. This is leading to feedstock supply difficulties in many places or additional costs from diversions to alternative transport routes.

The latest supply-related issues are summarised below;

JBF RAK is understood to be ready to sell off its 400,000 tonnes/year PET plant in Geel, Belgium to settle part of its outstanding debt.

BASF commenced planned maintenance work at its butyl acetate plant at Ludwigshafen, Germany in the first week of September. The turnaround is expected to last three or four weeks.

Shell Nederland reported a return to full operations 24 August at its Pernis refinery in Rotterdam. Therefore, almost all production is back to normal again.

On 22 August a fire broke out at Rhodia Acetow, Freiburg, Germany and caused massive damage to a turbine that is central to the site’s steam and power supply.

BorsodChem lifted the force majeure for PU feedstock MDI, among others, at its site in Kazincbarcika 22 August.

Lotte Chemicals PET plant at Wilton UK returned to production in September following force majeure.

Demand picks up

Demand picked up in September as would normally be expected following an end to the holiday season. Order intake for the rigid packaging and automotive sectors were reported as being particularly healthy.

October outlook

Polymer demand is expected to remain robust and the supply tightness prevailing in polymer markets is unlikely to end any time soon. A possible rise in feedstock costs is therefore likely to translate into higher polymer prices.

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