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AUGUST BRIEF: Higher Costs Are Pushing Prices Up

August 10, 2020
Demand across all market segments is improving, even if at a low pace. Meanwhile, costs are on the way up and producers are under pressure to avoid further losses.

Engineering polymers in Europe are seeing higher costs pushing up prices across all markets in August. For those markets that are still suffering from oversupply, there is a risk that margins will decreases again. However, other polymers will either see prices roll over or even margin increases.

Polycarbonate (PC) demand is still improving but at a slow pace. Costs are on the way up and producers are looking for higher prices. However, since prices did not go down too much since the pandemic, the upside is limited. If the auto sector in September picks up as expected, then it is possible that PC prices will start to increase.

Increasing costs

Polymethyl Methacrylate (PMMA) sellers are looking for high prices. There was talk of quarterly increases of up to €300/mt. The main driver is cost. Methyl Methacrylate (MMA) prices are increasing, albeit at a moderate pace. Spot values from July to August are about €50/mt higher. The low phenol demand was tightening acetone supply and placing upward pressure on MMA costs in Europe.

Nylon 6 (PA6) demand is still poor, but benzene and caprolactam prices are increasing. Caprolactam producers are still struggling to pass on the entire benzene price increases. For the past few months, the oversupply of PA6 has not allowed any price increases, regardless of the movements in costs. However, in August the dynamics seem to be changing. Some buyers do expect that they will have to accept price increases.

PA66 oversupply

Nylon 66 (PA66) remains oversupplied. The weak automotive market continues to fuel the oversupply. Producers have been reducing operating rates for months now and while it has somewhat tightened supply, there is some way to go before the market returns to balance. There is more of a chance of rollovers than increases in the next few months. The key, as in all other engineering resins markets, is the auto sector. A strong rebound could trigger an upward revision of the current flat forecasts.

Acrylonitrile Butadiene Styrene (ABS) demand is getting better every month. Some key markets such as construction, small appliances and medical continue to improve. Moreover, Asian imports have shrunk and allowed European producers to capture some of these volumes. This helped to balance a long market and allowed domestic producers to finally maintain margins and even increase them on some accounts.

Styrene Acrylonitrile (SAN) demand is still not back to where it was last year. But like all other markets it is moving in the right direction. As seen in the ABS market, Asian volumes are lower, and the market is more balanced. Producers will have little problem in defending margins in August. The compounding sector, however, is still suffering and sellers are fighting for volumes.

Single use boost

Polystyrene (PS) prices are moving with costs amid a relatively healthy market environment. The summer season has increased demand for single use applications more than expected as it helps to protect against the virus. The packaging sector is still doing well but growth has slowed down as countries opened up. Moreover, producers appear to have managed operating rates well, enough to keep the market balanced.

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