Polymer raw material prices: 2013 review and 2014 outlook · 7 7 7 7 7 7 7 7 7 7 7 7 £400.00 Jan...

3
37 bp&r POLYMER PRICING As 2014 gets underway, Plastribution’s Mike Boswell reflects on the activity and pricing that influenced the UK polymer materials market in 2013 and gives an outlook as to what the industry can expect from the year ahead. Polymer raw material prices: 2013 review and 2014 outlook 2013 Review Whilst 2013 appeared to be every bit as exciting as 2012 in the world of plastics, in reality it was actually a period of relative stability in terms of polymer pricing. This is clearly demonstrated in the following comparison of Polyolefins pricing during the last three years: Key Price Drivers The key drivers of the stable but high pricing were crude oil and feedstock costs. Oil traded between £500 and £555 pounds per tonne (100 – 120 USD per barrel) throughout the year and was very much a stabilising influence on global polymer prices. Hence, on the back of oil prices, polymer feedstocks also demonstrated relative stability. Exchange Rates Another key factor influencing polymer prices here in the UK is exchange rates. The GBP Euro exchange rate is highly influential on the more commodity polymers and the GBP/USD rate tends to affect the Engineering Polymers, where imports of these products from Asia tend to be dollar-derived. Again, the stability of the GBP vs. Euro is notable, with the whole period spent in the range 1.16 to 1.20. The depreciation of the USD vs. GBP was a key influence on the price trend for Engineering Polymers in the second half of 2013. 2013 as a turning point From a general economic perspective there is little doubt that 2013 will go down in history as a significant turning point in the global economic crisis. Whilst at the start of the year it rapidly became clear that the USA was on the road to recovery, helped in no small part by the Shale Gas bonanza that is now underway, leading to cheap energy (and before too long polymer) prices. Here in the UK we started the year with fear of a triple dip recession with worse yet to come. As it turned out it was only a single dip recession (just!) and the UK economy posted some pretty healthy growth in H2. For the plastics sector there is no doubt that UK automotive was the star of the show with both record production and record sales. However, even by the end of the year the much beleaguered private housing sector was showing strong signs of recovery, albeit with rapidly growing fears of a debt-fuelled recovery in prospect and a rapid return from boom to bust. Min Max Range Volatilty 2011 £1,143.19 £1,384.79 £241.61 19% 2012 £998.34 £1,327.89 £329.55 26% 2013 £1,178.07 £1,312.98 £134.91 11% 1,000.00 USD per tonne GPD per tonne 850.00 700.00 550.00 400.00 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 Jul 17 Aug 17 Sept 17 Oct 17 Nov 17 Dec 17 £400.00 Naphtha Spot Ethylene (C2) Spot Ethylene (C2) Contract Propylene (C3) Contact Benzene Spot Benzene Contract Styrene (SM) Spot Styrene (SM) Contract £625.00 £855.00 £1075.00 £1300.00 POLYOLEFINS BASKET BRENT CRUDE OIL PRICES PER TONNE FEEDSTOCK COSTS GBP EXCHANGE RATES 1.10 1.25 1.40 1.55 1.70 Euro USD Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sept 13 Oct 13 Nov 13 Dec 13 Jan 2013 Apr 2013 Jul 2013 Oct 2013 Jan 2013 Mar 2013 May 2013 Jul 2013 Sept 2013 Nov 2013

Transcript of Polymer raw material prices: 2013 review and 2014 outlook · 7 7 7 7 7 7 7 7 7 7 7 7 £400.00 Jan...

Page 1: Polymer raw material prices: 2013 review and 2014 outlook · 7 7 7 7 7 7 7 7 7 7 7 7 £400.00 Jan 2017 Naphtha Spot Ethylene (C2) Spot Ethylene (C2) Contract Propylene (C3) Contact

37bp&r

PO

LYM

ER

PR

ICIN

G

As 2014 gets underway,Plastribution’s Mike Boswell

reflects on the activity and pricingthat influenced the UK polymer

materials market in 2013 and gives anoutlook as to what the industry can

expect from the year ahead.

Polymer raw material prices:2013 review and2014 outlook2013 Review

Whilst 2013 appeared to be every bit as exciting as 2012 inthe world of plastics, in reality it was actually a period of relativestability in terms of polymer pricing. This is clearlydemonstrated in the following comparison of Polyolefins pricingduring the last three years:

Key Price Drivers The key drivers of the stable but high pricing were crude oil and feedstock costs.

Oil traded between £500 and £555 pounds per tonne (100– 120 USD per barrel) throughout the year and was very mucha stabilising influence on global polymer prices. Hence, on theback of oil prices, polymer feedstocks also demonstratedrelative stability.

Exchange Rates Another key factor influencing polymer prices here in the UK

is exchange rates. The GBP Euro exchange rate is highlyinfluential on the more commodity polymers and the GBP/USDrate tends to affect the Engineering Polymers, where imports ofthese products from Asia tend to be dollar-derived. Again, thestability of the GBP vs. Euro is notable, with the whole periodspent in the range 1.16 to 1.20. The depreciation of the USD vs.GBP was a key influence on the price trend for EngineeringPolymers in the second half of 2013.

2013 as a turning pointFrom a general economic perspective there is little doubt

that 2013 will go down in history as a significant turning point inthe global economic crisis. Whilst at the start of the year itrapidly became clear that the USA was on the road to recovery,helped in no small part by the Shale Gas bonanza that is nowunderway, leading to cheap energy (and before too longpolymer) prices. Here in the UK we started the year with fear ofa triple dip recession with worse yet to come. As it turned out itwas only a single dip recession (just!) and the UK economyposted some pretty healthy growth in H2. For the plastics sectorthere is no doubt that UK automotive was the star of the showwith both record production and record sales. However, even bythe end of the year the much beleaguered private housingsector was showing strong signs of recovery, albeit with rapidlygrowing fears of a debt-fuelled recovery in prospect and a rapidreturn from boom to bust.

Min Max Range Volatilty2011 £1,143.19 £1,384.79 £241.61 19%2012 £998.34 £1,327.89 £329.55 26%2013 £1,178.07 £1,312.98 £134.91 11%

1,000.00

USD per tonneGPD per tonne

850.00

700.00

550.00

400.00

Jan

17Fe

b 17

Mar

17Apr

17M

ay 17

Jun

17

Jul 1

7Aug

17Sep

t 17

Oct 17

Nov 17

Dec 17

£400.00Jan 2017

Naphtha Spot

Ethylene (C2) Spot

Ethylene (C2) Contract

Propylene (C3) Contact

Benzene Spot

Benzene Contract

Styrene (SM) Spot

Styrene (SM) Contract

Apr 2017 Jul 2017 Oct 2017

£625.00

£855.00

£1075.00

£1300.00

POLYOLEFINS BASKET

BRENT CRUDE OIL PRICES PER TONNE

FEEDSTOCK COSTS GBP

EXCHANGE RATES

1.10Jan 2017 Mar 2017 May 2017 Jul 2017 Sept 2017 Nov 2017

1.25

1.40

1.55

1.70

EuroUSD

Jan 1

3

Feb 13

Mar 13

Apr 13

May 13

Jun 1

3Ju

l 13

Aug 13

Sept 1

3

Oct 13

Nov 13

Dec 13

Jan 2013 Apr 2013 Jul 2013 Oct 2013

Jan 2013 Mar 2013 May 2013 Jul 2013 Sept 2013 Nov 2013

BP&R Jan Feb 2014 QUARK8_Layout 1 05/02/2014 15:32 Page 37

Page 2: Polymer raw material prices: 2013 review and 2014 outlook · 7 7 7 7 7 7 7 7 7 7 7 7 £400.00 Jan 2017 Naphtha Spot Ethylene (C2) Spot Ethylene (C2) Contract Propylene (C3) Contact

bp&r

38

PO

LYM

ER

PR

ICIN

G It is not anticipated that US shale gas will have a significantimpact on global polymer pricing in 2014, as it is not until 2016and beyond that US production capacities will necessitate asignificant level of imports. The possibility of creating a freetrade agreement between the EU and the US is in markedcontrast to the recent increase of import duties describedearlier, and ultimately could have a far more significant impacton polymer production within Europe.

SummaryIn summary it appears that the market in 2014 is likely to

look rather similar to the last 12 months. In the same way thatthe world has got used to high oil prices, the higher value ofpolymers has now been recognised and accepted.

In terms of polymer groups and individual polymers, moredetailed commentary is provided below.

Polyolefins

2013 Review2013 was a year of relative stability with less dramatic

fluctuations than have been experienced in previous years. Twopricing cycles were completed during the year with pricingpeaks in March and September. Polymer prices largely followedthe trends set by monomer prices.

In overall terms there remained an imbalance betweensupply and demand, demand having not yet caught up with thecapacity increases of recent years, particularly from MiddleEastern producers. Polymer producers complained of poormargins and operated at reduced production levels to matchdemand rather than allow stocks to build and prices collapse.More closures of older, small capacity European plants wereannounced.

2014 OutlookExpectations for 2014 are similar for 2013 in terms of

market conditions and pricing levels. It is anticipated thatproducers will continue to match production levels with demandand that further rationalisation of older, higher cost Europeanplants will take place. What is not yet fully known is the effectthat cheaper feedstocks from shale gas could have on themarket, although this is unlikely to become clear until 2015.

Market summaryDecember was a month of reduced demand as anticipated,

with demand in line with previous years. Some producersattempted to recover more than the increase in feedstock coststo restore margins but this was met with much resistance andwas probably more of a statement of intent for January.

The increase in monomer costs and subsequent polymerprice announcements for January were lower than anticipatedby many buyers and in comparison with previous years.However, many producers are attempting to secure increases inexcess of the feedstock increase to improve margins.

£350.00

Brent Crude

Naphtha Spot

Ethylene (C2) Spot

Ethylene (C2) Contract

Propylene (C3) Spot

Propylene (C3) Contract

Polyolefin Basket£612.50

£875.00£

per

tonn

e

£1137.50

£1400.00

Jan

17

Mar

17

May

17

Jul 1

7

Sept 1

7

Nov 17

POLYOLEFINS

2014 OutlookThe New Year has certainly started in favour of the polymer

producers, with most targeting increases above feedstock inorder to recover margin.

In the case of polyolefins and polystyrene, Q1 tends to be aperiod of strong demand in which converters both tend toreplenish inventories that are typically depleted for theDecember holiday period, and the traditional lack of holidays inthe January to March period tends to lead to high productivity.Also, since the financial crisis in 2008, polymer producers havebecome highly focused on inventory not only matching output todemand, but also actively curbing output when margins are lowin order to adjust the supply demand balance.

As previously mentioned when looking back at 2013, a keyinfluence on polymer prices for the coming year will be the priceof oil. Whilst some pundits are predicting a dramatic fall toaround 80USD per barrel, others would argue that given thecurrent costs of oil production the current levels are more likelyto be sustained into the longer term.

Continuing recovery in the global economy will both supportoil prices and also increase demand for plastics, which typicallyincreases at a rate in excess of global GDP. In the case ofEngineering Polymers, where price trends are more closelylinked to economic conditions, it is likely that the overalldownward price trend will be reversed as polymer producerslook to recover margins; 2013 has already started with anumber of price increase announcements. In the case ofcommodity polymers including polyolefins and polystyrene, it isexpected that, both on the back of high oil prices and as aresult of producers closely matching output to demand, pricesare likely to remain at current levels with moderate volatility.

Exchange rates will continue to be an important influenceon UK trade, and with the expectations of further recovery it isexpected that the GBP will continue to strengthen against majorcurrencies including the Euro and USD. Whilst this will hamperthe efforts of exporters to win new business, a stronger poundwill help to mitigate the high polymer prices.

The increase in import duty on polymers sourced from theMiddle East and parts of South America into the EU will createsome slight upward price pressure, with the improvement inprofitability on any marginal operators within the EU. Theincrease in duty is contrary to the longer-term objective ofremoving duty barriers to world trade, and already pressure ismounting to further review this situation.

Feedstock Change (Contract)C2 (Ethylene) £12.55C3 (Propylene) £16.73Styrene £29.28Benzene £30.95Brent Crude £3.43

POLYMER PRICES

Mar 13

May 13

Jul 1

3

Sept 1

3

Nov 13

Jan 1

3

BP&R Jan Feb 2014 QUARK8_Layout 1 05/02/2014 15:32 Page 38

Page 3: Polymer raw material prices: 2013 review and 2014 outlook · 7 7 7 7 7 7 7 7 7 7 7 7 £400.00 Jan 2017 Naphtha Spot Ethylene (C2) Spot Ethylene (C2) Contract Propylene (C3) Contact

39bp&r

Styrenic Polymers

2013 PS ReviewPolystyrene had another interesting year with fairly

unpredictable price swings relating to currency and oil pricing,mostly driven, it would seem, by the unrest in the Middle East.Price swings of over £100/T had been seen for both HIPS andCrystal with the December price eventually settling £100/T lowerthan the year started, mainly due to the strengthening pound. Asthe year ended, margin gains by the producers were not realised,with much lower than anticipated demand in December.

Coupled with the closure of Total’s Stalybridge 70,000T plant,the last remaining polystyrene production facility in the UK,demand throughout Europe and the UK appeared sluggish to flat.The Stalybridge production was transferred to Total’s Carlingplant, which is earmarked for a 165 million Euro investment.

With the closure of Stalybridge and the slow fight out ofrecession, supply and demand has been in the main balanced tooversupply with plants operating between 70 and 80 percentcapacity.

There were no major issues affecting supply in 2013 due tomaintenance or unplanned shut downs and therefore nopressure on pricing due to restriction of supply.

2013 ABS reviewABS pricing in the main tracked the SM price trend

throughout 2013. As the pound strengthened against both theEuro and the Dollar, Far Eastern imports were kept in check andpricing for both European and Far Eastern markets havegenerally remained fairly static throughout 2013.

2014 PS and ABS OutlookThe biggest driver for PS pricing is the cost of benzene, or

more accurately, the capacity to convert naptha to benzene.There is increasingly less refining capacity to produce benzenefrom naptha as the old steam cracker technology is taken off-line and not replaced. This will result in benzene pricingremaining firm in the near future.

PS production capacity is also balanced as outlined above.This situation may tighten if there are any unplanned plantmaintenance/production issues or if the economic recoverystarts to impact on availability, but there is a little way to gobefore this becomes an issue.

In conclusion, the outlook for 2014 will most likely be moreof the same.

ABS pricing along with SM is also dependent on acrylonitrileand butadiene, but probably the biggest factor is demand fromChina. If China imports are strong then we would expect pricesto firm. With reduced lower priced ABS imports available then itwould follow that European producers would take theopportunity to increase their margins where possible.

Engineering Polymers

2013 Review2013 overall proved to be a year where most engineering

plastics prices moved by only relatively small amounts and anymovements were as a result of the global economic situation, orwhere there was a supply/demand imbalance.

The year started with some price increases, but these thentailed off due to new capacity coming onto the global market forsome of the key volume materials. There was some priceerosion towards the end of the year, but some of the keyfeedstocks showed upwards movement during the same periodthat has yet to be reflected in polymer costs.

Generally the market for engineering plastics was stable,with little in the way of growth, but the situation is one ofgradual improvement, with most market segments showingdefinite signs of recovery.

2014 OutlookThe situation for 2014 is likely to be one of general stability

for most engineering plastics, with the UK economic situationcontinuing to improve and markets recovering. That said, theglobal supply and demand imbalance will not be changedquickly, so whilst there will be upwards pressure on feedstockcosts and hence polymer prices, these will inevitably be offsetby the aforementioned situation of over-supply.

A lot depends on the Chinese economy and its impact onthe supply/demand equation.

Market summaryDecember was as usual a quieter month, but busier than

recent years, with some slight softening of PC, POM and certainnylon prices. As we move into 2014, Benzene continues to risein price and this is putting further pressure on polymer prices,although this is offset by still sluggish demand and an excess ofmaterial in the market. PC costs however are already starting tomove upwards.

ABOUT THE AUTHOR

Mike Boswell is the ManagingDirector of Plastribution, aleading UK distributor of

plastics raw materials.

further information:www.PLASTRIBUTION.CO.UK

£350.00

Brent Crude

Benzene Spot

Benzene Contract

Styrene (SM) Spot

Styrene (SM) Contract

Styrene Basket£712.50

£1075.00

£ p

er to

nne

£1437.50

£1800.00

Jan

17

Mar

17

May

17

Jul 1

7

Sept 1

7

Nov 17

STYRENICS

£0.00

Brent Crude

Benzene Spot (EUR/t)

Benzene Contract (EUR/t)

Naphtha Spot (EUR/t)

Engineering Basket£750.00

£1500.00

£ p

er to

nne

£2250.00

£3000.00

Jan

17

Mar

17

May

17

Jul 1

7

Sept 1

7

Nov 17

ENGINEERING POLYMERS

www.britishplastics.co.uk/materialsoutlookandreview2014

Mar 13

May 13

Jul 1

3

Sept 1

3

Nov 13

Jan 1

3

Mar 13

May 13

Jul 1

3

Sept 1

3

Nov 13

Jan 1

3

BP&R Jan Feb 2014 QUARK8_Layout 1 05/02/2014 15:32 Page 39