Surplus supply scuppers planned polyolefin hikes

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Photo by Wikipedia Commons Freight traffic on the Rhine Valley Railway resumed after closure had led to bottlenecks

Apart from a temporary lull in November, petrochemical feedstock costs were on an upward trajectory during the final quarter of the year spurred by rising crude oil and naphtha costs.

In October, polymer producers targeted prices increases above the rise in raw material costs to improve their margins. However, a combination of better material availability and lackluster demand restrained price hikes in most cases to the feedstock cost rise. Polystyrene, on the other hand, saw sharp price rebates after styrene monomer (SM) costs plummeted €110/tonne. PET prices fell as a result of lower sales and higher imports.

For November, polyolefin prices surprisingly turned downward despite a rollover for the ethylene and propylene contract prices. Polyolefin producers offloaded surplus stock that had built up over recent months at bargain prices as the end of year approached. Polystyrene prices again fell sharply after another sizeable reduction in SM costs. PET prices were also down again on low seasonal demand.

Supply lengthens

Material availability improved during the final quarter of the year across all product sectors. There were high runs at cracker plants and de-stocking by producers as the year draws to a close. Several plants returned to operation following force majeure; including Borealis' PE and PP assets in Schwechat, Austria, which added to supply. A growing supply of competitively-priced imported material also added to the downward price pressure during November.

The latest supply-related issues are summarized below;

On 28 September 2017, Versalis declared force majeure for all "Clearflex" and "Flexirene" LLDPE products from Dunkirk, France due to an unforeseen electrical motor failure.

On 29 September 2017, a ruptured disc reacted to excess pressure in Ineos' LDPE plant in Cologne-Worringen, Germany and the line went into emergency shutdown, putting the plant out of operation for an indefinite period.

Freight traffic on the Rhine Valley Railway resumed on 2 October 2017, after seven weeks of closure. The closure had led to bottlenecks, not only for rail customers, but also for road transport, as many companies shifted from rail to road.

On 13 October 2017, BASF detected a "technical defect" in its plant that produces "ecoflex" and "ecovio" bioplastics at its site in Ludwigshafen and BASF declared force majeure for its biodegradable and compostable polymers. Production resumed during November.

Indebted Indian polyester and packaging group JBF Industries has restarted production at its European PET plant in Geel, Belgium with financial help from Swiss distributor MB Barter & Trading SA.

On 25 October 2017, Borealis declared force majeure on several types of PE and PP produced at its site in Schwechat, Austria, then subsequently lifted the FM mid-November.

Indorama Ventures has decided to permanently close its PET plant in Workington, UK, which has been mothballed since 2013.

Demand solid

Demand remained solid, particularly through November as converters took advantage of the lower prices on offer to supplement their stocks. At the same time though, they had to keep an eye on seasonal inventory management. The usual downturn in demand for Christmas and New Year is likely to be no different this year, especially given the higher than usual demand during November.

December outlook

In December, feedstock costs turned upward again as a result of rising crude oil and naphtha costs. Ethylene and propylene contract prices increased €32/tonne with the SM reference price up €95/tonne. With supply remaining long and demand subdued, polymer producers may struggle to pass through the higher costs to buyers. 

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