Are increasing polymer prices more sustainable than the feedstock prices that typically have initiated price inflation?

In this edition of our latest feature looking at the key issues that influence polymer prices, Mike Boswell looks at sustainability of pricing as we head further into 2017.

The dependence, or perhaps the interdependence or independence of plastics from their input costs is, and is likely to remain, a hot topic of debate. In the case of polyolefins the graph below, which is an index of a polyolefin price basket compared to brent crude, depicts a close correlation until about August 2014. Thereafter there appears to have been a paradigm shift with polyolefins becoming relatively much more expensive over a significant period of time.

Not withstanding the question of how polyethylene pricing may be effected by the start-up of a swathe of new capacity in the USA, where the economics of shale gas feedstocks will give plenty of opportunity for price competition, perhaps the more pertinent questions relate to the future pricing of styrenic and engineering polymers.

In the case of styrenic polymers, the meteoric rise in prices, particularly affecting polystyrene, was entirely based around short supply of styrene monomer in the North America region due to planned plant maintenance. Availability and lead-times were scarcely impacted and now that styrene monomer production has returned to more normal levels, there is clear downward pressure on styrene based polymers; this looks like a trend that may be set to continue through into the quieter summer months.

However, the case of engineering polymers is potentially quite different. Although initially benzene was the driver for many cost increases, the situation for a wide range engineering polymers is now one of short supply and extended lead times and, on this basis, the independence of the supply-demand balance for the polymer rather than the price of feedstock has become the determinant of price. In fact, although benzene prices have now started to reduce significantly, it is likely that the producers will resolutely defend price increases on the basis that they have bulging order books. For methanol-derived polymers, including POM and PMMA, it appears that increasing feedstock costs are also now acting as a catalyst for price increases and here again it is evident that PMMA lead-times are already starting to increase; a situation which will again support price increases.

For many on the supply side there is a strong argument for higher market prices for engineering polymers on both the basis of a long-term decline in price levels and also the reduction in relative cost compared to standard polymers. However, market fundamentals will ultimately dictate price levels and in the case of PC and POM, where capacity to supply appears to readily meet demand, it is likely that any reduction in feedstock cost is likely to lead to price reductions due to competition for market share. On this basis, it is likely that there will be some divergence in the price of different engineering polymers in the coming months.

Who is @polymerman?

Mike Boswell is Managing Director of UK materials distributor, Plastribution, as well as the Chairman of the British Plastic Federation’s Polymer Compounders and Distributors Group, as well as its ‘BREXIT Committee’. He has a broad knowledge of both materials and the issues affecting the wider industry, with over 20 years experience in the field. @polymerman is the title used for announcements made via his Twitter account.