Oilseed rape, wheat, rye and corn prices

Source: Ministry of Agriculture and Rural Development.

Compared with 2014, prices of rapeseed continued on the upward trend, while prices of grains fell:

Prices of nitrogen fertilizers (urea, CAN, AN, AS,) and ammonia

Source: ICIS, Argus FMB, Profercy.

Prices of compound fertilizers (NPK, DAP), potassium chloride and phosphate rock

Source: WFM, FERTECON, Profercy.

In 2015, prices of phosphate rock and potassium chloride rose slightly: by more than 3% and more than 2% year on year, respectively. Low prices of agricultural produce and lower incomes made farmers look for savings and purchase imported NPK fertilizers, at prices lower by PLN 50-100 per tonne than those quoted by domestic producers. However, in 2015 imports of NPK fertilizers shrank by about 25% compared with 2014.

According to forecasts for 2016, in the first half of the year prices of compound fertilizers will remain low, and a change in this trend is not to be expected until the second half of the year. Any potential price growth will depend primarily on the quantity and quality of the crops, and on general macroeconomic factors, including export possibilities. Analysts expect that in 2016 total domestic demand for compound fertilizers will shrink.

Prices of phosphate rock are likely to drop, due to declining prices of phosphate fertilizers.

The market situation for the entire product chain was strongly affected by prices of crude oil, which are an important driver of prices of petrochemical feedstocks. The year-on-year drop in Brent crude prices of more than 46% was largely reflected in the prices of benzene, phenol and caprolactam, putting pressure on polyamide (PA6) producers to reduce their prices and margins. Short-terms forecasts provide no indication of any clear reversal of this trend. Stabilisation of crude oil prices would create a favourable environment for the restoration of a full market equilibrium in the sector, thus supporting the expected increase in demand for plastics.

Prices of PA6, caprolactam, benzene and phenol

Source: TECNON, ICIS.

The crude oil price decline had the largest effect on the price of benzene. In 2015, its average annual price (FOB, NWE) was more than 36% lower than a year earlier. Among the factors that additionally affected benzene prices was the situation in the related markets (including the styrene market), connected with a gradual fall of demand in anticipation of more favourable prices of feedstocks for chemical production. Average annual prices of phenol went down as well, albeit not as much as the prices of benzene. Their decline of about 23% (FD, NWE) was driven by the downtrend in prices of crude oil, but also by seasonal supply deviations and the fact that producers were unable to ensure supply continuity due to plant failures and scheduled shutdowns.

Compared with the same period of the previous year, prices of liquid and flaked caprolactam fell by 15% and nearly 28% (CFR, NE Asia), respectively, pushed down by the dramatic drop in the prices of benzene, and by growing benzene production volumes from Asia. In 2015, the average price of polyamide 6 (PA6, Engineering Resin Virgin, DDP, WE) was about 1,669 EUR/t. Compared with 2014, it fell by more than 17%.

The entire segment experienced overall global oversupply, caused by the considerable increase in production capacities in China. Excess production capacity was also visible in the European markets, both in the case of caprolactam and polyamide. To keep their market shares, producers were forced to reduce margins, thus maintaining a price level acceptable to the market. However, the gradual development of the motor industry in the region and the prospects for GDP growth in Europe may pave the way to PA6 consumption growth in 2016. The PA6 market should be expected to expand in the long term, given the considerable potential with respect to extension of the product chain towards increasingly more technologically advanced products.

Prices of 2-EH, DOTP and propylene

Source: ICIS.

Propylene prices were driven predominantly by the slump in crude oil prices but also, especially in the second half of 2015, by an oversupply of propylene related to maximised output of ethylene. As a result, year-on-year spot prices of propylene fell by approximately 25%.

The price of the key 2-EH alcohol reflected a downward trend in propylene prices and fell more than 20% year on year. Given considerable propylene price fluctuations, customers purchasing alcohols pursued a very conservative procurement policy focused on satisfying their current production needs. The prices of key plasticizer − DOTP fell almost 9% year on year, partly on the back of lower crude oil prices and procurement policies designed to limit stocks.

Generally, both OXO alcohols and plasticizers were in oversupply on the European market. In particular, Southern and Western European markets were affected by imports from Russia, Turkey and Asia. Producers struggled against strong competition as some European manufacturers, finding it increasingly difficult to sell their output in China, chose to seek alternative markets. Additionally, capacity constraints experienced in 2015 by PVC producers due to force majeure events, largely contributed to lower consumption of OXO alcohols and plasticizers used in PVC production.

In the long term, demand for 2-EH and DOTP in Europe is forecast to increase annually by 2.9% and 6.2%, respectively. Nevertheless, the target markets are very sensitive to current geopolitical and macroeconomic developments, and can easily be affected by pressures from the competitive environment. We predict that 2016 will see continued uncertainty and conservative procurement strategies on the part of customers.

The European sulfur market remained stable throughout 2015. Prices continued on a downward trend, reflecting the situation on the commodity market in general.

Sulfur prices

Source: FERTECON.

In 2015, contract prices of melamine on the European market rose by ca. 1.4% year on year, driven by increased demand from North America, Turkey and Russia.

In the autumn season, higher demand for melamine was seen in the construction and automotive sectors.

Prices of melamine

Source: ICIS, Global Bleaching Chemicals.

Given the stable market, in 2016 melamine prices in Europe should remain at levels close to 2015, or may rise slightly, with demand following a similar pattern.

Prices of natural gas

Source: PGNiG tariff, ICIS.

In the reported period, spot prices of natural gas were on a downward trend.

The oversupply of gas on the market, the warm weather, and low crude prices are likely to support a further price decline in 2016. According to IHS Energy, coal prices in the EU may drop to EUR 15/MWh.

In 2015, average monthly prices of electricity fell relative to 2014 by 15%. Electricity prices were volatile over the year, reaching their peaks in August, when persistent heatwaves and unfavourable hydrological situation in Poland forced restrictions on electricity supply and consumption.

Prices of electricity

Source: Polish Power Exchange.

IRDN − average price weighted by the volume of all transactions on a trading day, calculated after the delivery date for the entire day.

The prices of electricity in 2016 may be driven by a combination of offsetting factors:

• Proposed resolution of the crisis in the Polish coal mining industry with the participation of energy companies, difficult restructuring of coal sector companies;
• New obligations imposed on electricity producers by the Act on Renewable Energy Sources
• Falling prices of natural gas;
• Continuing low prices of coal and regulations. The domestic market is largely affected by climate regulations and the need to continue upgrading generation capacities (expenditure on new production capacities) and maintain operating capacity reserve (effect on production costs).

No further considerable decline in electricity prices is expected in the near future.

Prices on the global coal market are returning to the levels seen before the Chinese boom. In China, the world’s largest consumer, coal prices have been falling for three years and hitting consecutive record lows. Performance of coal indices is down 25% year on year.

Prices of hard coal

Source: ARA prices.

The Polish coal market continues to be oversupplied. In the coming months of 2016, a slight downward trend in coal prices is expected to continue.

Analysts expect that in 2016 coal prices will stay largely flat compared with 2015.

The continuing oversupply of coal might prevent price hikes in the coming months, although prices may go up periodically in the event of severe winter, unless China decides to permanently shut down a large number of its coal mines.