We are witnessing finally a distant light in Europe with Covid-19 situation getting slowly under control in most countries. Southern, Eastern and Northern Europe is re-opening slowly it’s activities as well restaurant, bars. We can expect situation to gradually come back to a pseudo-normality.

This is also signaling that in May we have reached in Europe the lowest levels in raw materials and June is showing a general round of increases, with Oil (Brent index) stable above 40 $/t, Naphtha showing some strong increases (after a shocking low of 130$/t in its darkest moment) and monomers generally posting some decisive increases.

Nevertheless the downstream sector and general demand is still heavily impacted by the pandemic crisis with only specific sectors of the industry coming back to full capacity. We are expecting this situation of low demand to continue on most sectors for the next month with the automotive sector being the most hardly hit with an expected recovery not before 2021.

Slow monetary intervention from local governments into the direct economy are also showing some cash flow issues in SME which could lead to casualties if no major further action will be taken.

We are forecasting a firming trend on monomers till September and this is also reflected by the strong firming on most monomers and downstream products in Asian markets. We can expect generally a partial recovery on the April and May strong dip and it will mostly depends on demand increase in the next month.

On the side of the downstream market we are not expecting a show up in demand to Q1 levels but more on a slow recovery month after month and a stop for most Southern European economies for August break.

Highlight on PVC Market

Pvc market tightens in Asia and prices spiked in the last 2 weeks. Prices firmed, mainly on account of stronger import offers from oversea producers and bullish regional buying appetite. Higher PVC futures on the Dalian Commodity Exchange and bullish upstream costs, further supported the price rise. This have later been reflected on the Turkish market which turned bullish too on PVC with much higher prices witnessed from May.

In Europe we can clearly see a good demand for the pipe, flooring and gardening sector. While Compounding sector is still lagging behind and suffering with its utilization capacity rate which can be accounted around 70%. Generally PVC prices are reflecting monomer 50% C2 increase of 30 €/t but we can see some lower +20 €/t here and there. The main problem to assess prices is a large number of Spot prices from Western European producers.

Regarding production we are witnessing issues in some Central European plants.

Finally our forecast is definitely a firming trend in prices of PVC in July, following Asian market as well as very probable July C2 increases.

Highlight on Plasticizers Market

Plasticizer markets are tightening in Asia posting increases of more than 120 $/t following bullish local raw material prices while in Europe we can still see a very difficult market due to slow demand, despite Naphtha and C3 increase of 60 €/t. Compounding sector is definitely affected as well as coating, cable and automotive sector in general. While medical, gardening and flooring sector are definitely much stronger at the moment. Generally some suppliers have tried to increase prices this month due to higher feedstocks but we think they were trying to increase prices in June to prepare customers for a more realistic increase in July.

We can divide our analysis in 2 segments:

  • European based productions (DINP & DIDP/DPHP) where there is a clear overcapacity and prices have reached historic lows with producer not managing to raise prices despite rebound in Naphtha. However we believe that despite high stocks, prices should have reached their lows considering most of the market going with roll overs or small increases. We are therefore heading for some probable increases in July
  • European and Extra European based productions (DOTP) where we can see a very confused market with extremely wide price range. Demand is on hand to mouth basis and often price is not the main driver but rather lead time. Final end users are willing to remain low with stocks and consume only what is needed for the month production. This is preventing, mainly, cheap imports as nobody is willing to take further risks considering demand very uncertain in the near future. Nevertheless we expect June to have reached the bottom with prices and if demand should increase slightly we may well expect some possible increases in July

 

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