Everyone agrees that the main reason for the chemical and plastics industry’s current suffering is the lack of demand. And the causes are well known. Inflation is running high and consumer spending is at a low level, if indeed, it exists at all. The customer industries thus have no need to call up goods either. Lanxess CEO Matthias Zachert aptly summed up the situation a few days ago when he stated that demand was “lousy”.  

The majority of plastics converters are sitting on polymer warehouses that are either well stocked or filled to the brim. Over the past few weeks, a number of them have seized the opportunity to order material and stock up on production supplies in case the eagerly awaited upturn arrives in the autumn. This is because numerous producers drastically lowered their prices in a bid to generate any sales at all and to avoid having to shut down their plants completely. Anyone who was in a position to make purchases did so. Some converters even ordered more than they needed – doubtless in the hope of giving themselves greater leeway when embarking on price-related conversations after the summer.

In the meantime, the prices of a number of monomer contracts have changed direction and are moving upwards again. And what are the polymer producers doing? They have sensed an opportunity and are discarding their dumping-price sales strategy and demanding hikes, seemingly unaware of the dividing line between brash and crazy. The consequences of this 180-degree turnaround are proving fatal in economic terms – like scared turtles, converters are retracting their heads and ordering nothing at all.

Overtightening the price screw only serves to shear off demand. Greed isn’t always cool in a market economy. Precisely in times of crisis, the budding economy is a delicate plant, easily crushed by the careless play of free forces. Players along the value chain in the plastics industry should make sure that things don’t reach that point.

Vincent Breit
Market Analyst, Plasteurope.com Price Team