Market Update — February 2024
Merger and Logistics Constraints
PC
For Q1/24, demand for PC is expected to increase by over 2.5% and sales are expected to increase by 3.0%+ and
5.1% in Q1 and Q2 2024 respectively with lower inventories of materials in place. Imports don’t seem to be
significantly different (up or down) through 2024 while exports will be decreasing through 2024 due to weak
demand and excess capacity in Asia. All this while cash costs are starting to increase.
Covestro and Adnoc are still in talks, and it seems to be only a matter of time before the deal happens and seems
to be the matter of the value put on Covestro. Sabic finally shut down 1 of 2 PC facilities in Cartagena, Spain. This
has been expected for some time with the ongoing struggle with high energy costs in Europe.
With cash costs on the move, Covestro finally came out with their 10 CPP price increase at the end of January for
a March 1 implementation. Siting raw material, transportation, and higher energy costs as the reasons behind the
increase. Recalling that Sabic put out 9 CPP on PC right before the holidays and it didn’t seem to stick (at least not
at 9 CPP) because it was too early. Now with Covestro jumping on the bandwagon, it cannot be ignored.
ABS
Ineos fired up its first China facility, (Ningbo) which is a JV between Sinopec and Ineos for 3 ABS production
facilities over the next 3+ years. The first plant has a reported 600,000 MT of capacity, the next is planned to open
in 2025 in Tianjin with 300,000 MT capacity. The 3rd facility is TBD for both size and timing.
ABS demand is expected to be up over 3.0% in Q1/24 with sales up nearly 4% with again, lower inventory levels in
the market. The question is – is this a short-term bump or the start of a movement? Imports are expected to go up
in 2024 with exports doing the same. In the long term (2025 and beyond), we’re projecting imports and exports
will go down based on new capacity coming online in Asia during 2025. Today and for the near future, cash costs
are moving up by ~1 CPP each for the next 2 months, but not sure it will support a price increase given demand is
not yet strong enough to justify.
There has been a concerted effort to push through ABS price increases since Q4/23:
| Effective Date | Producer Increase |
|---|---|
| November 1 | Ineos $0.05 |
| February 1 | ChiMei ($0.05), Elix ($0.02), and Formosa ($0.02) |
While Sabic swung for the bleachers at 9 CPP increase, most increases were more focused at the 3 to 5 CPP range
giving them more validity. It’s only a matter of time until the price increases stick with Ineos being the early
adopter in the ABS market with the lone November increase.
Nylon
Supply is strong for 6 and 66 while the price reductions are more focused on lower costs and demand seems to be
flat currently. Interestingly, looking forward, the costs for 6 and 66 seem to be on the move and I see price
increases in their future based on costs starting to move up!
Styrene
American Styrenics moved 5 CPP on 2.1 for all grades of material and the price increase went into effect that
same day. There was no discussion about why the increase so it’s safe to assume cash cost to produce is the
culprit.
Logistics:
Major carriers issued another round of general rate increases effective February 1. These increases affect all
of Asia’s services to all U.S. coasts. Surcharges remain imposed on transits through the drought-stricken
Panama Canal and delays continue in the Suez Canal at 5% of normal throughput. Carrier services go all the
way around the tip of Africa to avoid the Suez Canal.
From Lotte, on January 17th, they implemented a 9 CPP surcharge for all shipments coming to the States for
shipments made on/after February 1st:
As widely reported this year, many European ocean freight sea routes have either been compromised or
significantly reduced due to security incidents and the Red Sea – Panama/Suez Canal. Additionally, low
water levels in the Panama Canal have reduced routes and shipping tonnages from Asia to eastern US
ports. The combination of these incidents is rapidly driving up the costs of ocean freight. Lotte must
quickly take steps to minimize the impact on costs with our shipping partners by exploring alternative
routes and other countermeasures. While we continually strive to minimize these costs, the magnitude and
persistence of the current price pressures require us to apply a logistical surcharge.
From LG Chemical, they moved 7 CPP announced on the 30th of January and implemented for shipments on
2.1.24:
The price increases are in response to increasing freight costs associated with the recent Suez attack and
Panama draft that is limiting vessel availability and pushing shipment costs higher.
The canal issues will be a marathon and not a sprint, and we’re confident that more importers will follow. Given
the prices they are importing at, it’s not a sustainable model to NOT add the surcharge.
Speaking of sustainability, have you heard about Star’s reNova™ product line? If you have sustainability initiatives
and need recycled content material, Star can help!
This line of products with ULE validation (3rd party verification)
The product offer includes:
- ABS GP and FR
- PCABS GP and FR
- PC GP and FR(with elevated RTIs and (f1) rating)
- Nylon 6 and 66 GP products with and without glass!
Contact your local Star Plastics representative for more information.
If you have market information you’d like to share, please email me at the address below. Thanks, and have a
great month!