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Arriving imports, ebbing demand weigh on Europe’s PP and PE markets

by Manolya Tufan - mtufan@chemorbis.com
  • 04/04/2024 (01:45)
The sentiment in the regional polyolefin markets has faltered to some extent even before April monomer contacts that settled higher. Ebbing demand seems to be the main culprit behind the changing sentiment following a 3-month long uptrend. From that moment on, PP and PE markets are unlikely to absorb further increases amid the arrival of imports at aggressive levels.

Initial hikes for EU material surface in line with monomers

April propylene and ethylene contracts settled with respective hikes of €45/ton and €40/ton from March, as was anticipated earlier. This has allowed producers to start issuing increases in line with the monomer hikes, although the response has been lukewarm due to the lingering holiday lull within the bloc.

It is straightforward to say that April will not be a month to improve margins, while it remains to be seen if sellers can achieve initial hike targets on April deals amid positive impulses lacking for the near-term. Offers in the distribution channel have already emerged with smaller increases of €15-20/ton, several buyers reported.

PP fares better than PE

Given short availability for some grades, the PP market was more resilient than PE last month. The PE market saw visible downward corrections during March, which resulted in smaller increases for this grade.

According to ChemOrbis Price Index, the monthly average prices for PPH, PPRC and PPBC inj. rose by around €100/ton from February both in Italy and West Europe. As for PE, monthly increases ranged between €40/ton and €90/ton depending on the grade during March.

FD–Italy–PPBC–PPH–LDPE–LLDPE

Production issues including run rate cuts and force majeures kept regional PP supplies short in the first quarter of the year, let alone the Red Sea diversions and subsequent delivery disruptions. Some PP grades are particularly tight as regional suppliers are inclined to rationalize given weak demand from the automotive sector.

Eyes on arriving cargos from Asia and the Middle East

However, some participants have noticed a slight improvement in the availability of non-European materials amid arrivals from Asia and the Middle East. According to them, this may thwart hike attempts as a real pickup in demand is not within the realms of possibility.

A buyer said, “The market is the under pressure of weak demand and arriving import cargos. We are not struggling to find material as demand is also limited.”

Aggressive import offers stand below European ranges

Prices for European and non-European origins followed divergent paths. Sellers reported offering non-European origins with €30-50/ton decreases to deplete their stocks amid calm demand.

A regional buyer reported to have received Mid-Eastern PPH offers at €1250/ton FD this week, while another buyer received South Korean PPBC offers at €1300/ton FD.

US PE prices, meanwhile, have been falling since last week. US LDPE was at €1270-1300/ton FD, 60 days. US LLDPE C4 film was offered at €1200-1250/ton, while HDPE b/m and mLLDPE C6 stood at €1200/ton and €1250-1270/ton, respectively, with the same terms.

These prices stand below the low end of the Europe’s spot ranges. Lower bids for European material will surely ensue as buyers resist inflated spot levels.

Will April be a month of rollovers?

Players mostly concurred on the fact that the pressure on the regional polyolefin markets is mounting amid a holiday-shortened month also considering arriving imports. Hence, they do not rule out rollovers later in the month or even some discounts in case sellers decide to spur buying interest in H2 April.

Buyers sit tight in the anticipation of lower pricing in May and June, if not in April. A major market source opined, “It will be difficult to attain the entire monomer hike after 3 months of hefty increases. Buyers are reluctant to pay increases. Arriving import cargos will put pressure on prices.”

European producers will not be able to obtain any hikes, while they may close the month with rollovers to small drops, as a trader put it.

As for the longer run, European players are wary of increased PP imports from Asia, considering the supply length in China that could not be absorbed by global markets given economic headwinds. The pressure is here to stay, while it is likely to intensify when not only South Korean and Saudi but also Chinese PP starts hitting European shores, participants suggested. As for PE, US will continue to be the leading supplier considering the feedstock advantage and oversupply situation.
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