Polymer prices set to rise in November as supply tightens towards year-end

Weak demand accompanied by production cutbacks

Demand was weak last week. Plastics processors are already preparing for year-end and are buying only essential quantities. Most have sufficient stocks to last until the end of the year.

Meanwhile, some European polymer producers have cut production due to higher energy and feedstock prices. Similar developments can be observed in the Far East, while production disruptions and unplanned shutdowns are reducing supply in North America.

European monomer prices are expected to increase significantly, potentially approaching a triple-digit amount in euros. Preliminary information suggests that polymer producers want to pass on at least the full increase in monomer prices to offset rising energy costs.

Supply tightening in Europe and on import markets

Price growth is being supported by a gradual tightening of supply across all polymer types in Central and Western Europe. This is due to ongoing maintenance, shutdowns caused by feedstock shortages, and production cutbacks and stoppages resulting from high energy prices.

European gas prices have exceeded the psychological threshold of 100 €, and no significant decline is in sight yet. The impact of rising energy costs is likely to persist throughout the winter season. More polymer producers are expected to opt for shutdowns rather than produce at substantial losses.

The situation is being exacerbated by lower-than-usual import volumes from the Far East, Central Asia and North America. The combination of high raw material and energy prices in the Far East and relatively weak demand has led to operations being halted at dozens of Chinese polymer production plants.

Prices in the Far East, China and Turkey are therefore high, in some cases even higher than in Europe. Shipments are consequently being directed to other markets. Supply of all polymer types is likely to be tighter than usual in November, December and even January.

Why are processors not building up stocks?

The effects of tight supply are not yet pronounced. European plastics processors and their customers are preparing for year-end, and orders for finished products and packaging are declining. Demand for polymers is therefore not strong either.

Although processors recognise the risk of polymer shortages, very few are buying in advance. Most significantly depleted their financial reserves during April's panic buying and now have little spare cash to build up stocks.

The experience of the spring, when panic buying subsided as quickly as it began, also plays a role. Processors expect a similar course of events this time. However, the current situation is different: polyolefin prices have been rising continuously for eight weeks, and polystyrene and PVC prices for four weeks.

What price increases could November bring?

Raw material and energy cost pressures will support further price growth in November. For polyethylene and polystyrene, even triple-digit increases in euros compared with levels in early October are possible. PVC producers will also attempt substantial price increases of up to 100 €.

The situation resembles the final quarter of 2020. At that time, price growth that began in October and November continued into the first quarter of the following year due to tight supply.

The most likely scenario for November and December

A scenario that was considered less likely just last week is now regarded as the most likely. November polymer price increases corresponding to monomer price adjustments at the beginning of the month will be accepted amid moderate demand.

Processors will buy and, fearing limited availability, will not reduce their polymer stocks. At the beginning of December, prices will remain at November levels or rise slightly further amid weak demand and tight supply.

In the second half of December, several exceptional deals will take place between polymer producers and processors buying large volumes. The probability of this scenario is now 50 – 55 %, depending on the polymer type.