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BRIEF: Costs Increase Amid Low Demand in July

July 6, 2020
Most engineering polymer markets are becoming more stable in July as economic activity improves. But costs are increasing while demand, even if better, is still struggling.

Margins could fall in July as costs increase amid low demand. July appears to have started on a positive note for most players even if the pace of progress in some markets is still worryingly low. The weakest markets remain the ones linked to automotive. The recent improvements in car sales are not translating to higher demand. This could be linked to participants trying to drive down stocks built during the heights of the pandemic, a period of extreme low demand. But while costs are rising, demand is low. Therefore, margins could be squeezed in July, or rather brought closer to pre-pandemic levels.

Polycarbonate (PC) demand for sheets is still strong but orders are slowing down. The slowdown in infections seems to have eased the appetite for protective equipment. Demand is improving but like other polymers the rate of increase is slow. There is plenty of availability and it seems producers are still fighting for volumes. Prices look set to roll over from June to July.

Polymethyl Methacrylate (PMMA) remains the product most widely used to combat the spread of the virus. But even for PMMA orders for such applications seem to be slowing down. Total demand is low and this could prevent any attempt to increase prices in July. Import prices are higher and unable to compete with domestic prices which remain stable. PMMA quarterly prices are expected to roll over from Q2 to Q3.

Nylon 6 (PA6) demand is low as many downstream sectors are suffering. Applications such as electrical and electronics, automotive and construction are recovering at such slow pace that will probably fail to support price increases. PA6 is another polymer where prices could roll over from June to July.

PA66 prices are still coming down

Nylon 66 (PA66) has gradually been moving from oversupply to a more balanced state. This is to do with slightly better demand and producers reducing operating rates. There is still plenty of availability, but the market is certainly in better shape than it has been recently. Prices are still coming down from the highs reached two years ago for some buyers. But others are only managing to achieve rollovers now.

Acrylonitrile Butadiene Styrene (ABS) prices are set to increase in July, largely on the back of higher costs. Prices of all the feedstocks, namely acrylonitrile, butadiene, and styrene, are higher in July compared to June. But the picture on demand is not so clear. Demand is still low in key sectors such as construction and especially automotive. However, it appears that since Asian volumes are slowing down, demand for some European producers has increased as they are filling the gap in import volumes.

Styrene Acrylonitrile (SAN) is still being used to produce sheets to combat against the spread of the virus. So demand in this area remains strong. But total demand is still low compared to last year. Many downstream applications are still performing poorly. From housewares to construction and cosmetics, demand is still very weak. With costs increasing, margins could be squeezed once again.

Polystyrene (PS) prices will most certainly increase on the back of higher costs in July. Demand is improving, albeit at a slow pace, and in line with most other polymer markets. The low exposure to the auto industry means demand is holding up well. It is understood that buyers are increasing activity and are asking for additional volumes. As such, there is a good chance that producers will be able to maintain margins in July.