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Demand slump counterbalances run rate cuts and energy surcharges in Europe’s polymer markets

by Manolya Tufan -
  • 17/10/2022 (08:57)
Regional polymer markets have been running through rare times, with run rate cuts and energy cost increases being in main focus since September. However, demand slump is so obvious that it has been preventing these factors from setting the tone of the market.

European polymer markets remained flush with material despite run rate cuts. Except for LDPE, supplies for other PE grades as well as other polymers continue to surpass demand, which emanated from unsatisfactory sales in September, higher import volumes and underlying weakness in demand.

Polyolefin suppliers trim initial hike requests

European PP and PE markets reversed direction after 5 consecutive months of strong drops as October kicked off. Despite lower monomer settlements, suppliers approached the market with hikes of up to €100-200/ton early in the month as major suppliers issued energy surcharges to recover their margins. Major polyolefin suppliers issued energy hikes of around €140-200/ton this month.

Still, initial hike requests had to be trimmed as underlying demand remained weak and energy surcharges could not be fully reflected on transactions. The PP market has not transitioned from ample to balanced very quickly even though regional suppliers cut run rates by around 20-30% or plants undergo planned or unplanned shutdowns. October PP deals were closed with rollovers to hikes of up to €50/ton in the week ending October 14.

When it comes to PE, LDPE, being the tightest grade, posted more visible gains. LDPE deals were closed with hikes of up to 3-digits. Other grades were either rolled over or rose only mildly as supplies continued to outpace demand. Some buyers even plan to push for discounts later in the month. Overall PE demand fared better than PP, meanwhile.

PVC supplies comfortable despite run rate cuts

Spot PVC fell for the 6th month in October as prices saw declines in line with the ethylene drop.
With most downstream sectors staging a slump, resin requirements remained low and weakness in demand outweighed lower run rates and high energy costs. Supplies were more than comfortable, also considering the presence of more imports.

The supply/demand imbalance is here to stay despite producers’ efforts to fine-tune production as overall demand is not giving signs of recovery considering the approaching winter season.

PET markets succumb to pressure from aggressive imports

As for PET, aggressive import prices forced regional suppliers to cut their offers visibly for October. Falling freight rates and off-season in the northern hemisphere were cited among reasons behind price falls.

PET producers, who are stuck between costs and weaker consumption, lowered run rates or conducted maintenance shutdowns. However, this did little to support overall sentiment and prices are more likely to extend losses into November.

Styrenics fall, defying firmer styrene

The same applies to the styrenics markets. PS supplies were deemed ample despite Total’s force majeure declaration and other production hiccups in the region. Although demand was a tad better than ABS, overall trading activity remained thin due to the ongoing challenges.

October PS deals were closed with €50-80/ton drops despite slightly firmer styrene settlement. However, sellers were reluctant to cut their prices much amid their squeezed margins.

ABS, meanwhile, posted decreases of up to €100-150/ton in some cases, with ample availability and poor demand exacerbating the pressure. Import prices were also aggressive, with more Asian cargoes finding their way to Europe amid falling freight rates.

Some players think that it will be difficult to see the impact of higher energy costs and lower rates in November too should lackluster demand force sellers to trim their offers to move cargoes.

Early November expectations call for minor changes

To put it in a nutshell, energy costs and supply disruptions had a milder than expected impact on prices in October. Polyolefin markets may follow a stable to firmer trend in November if current fundamentals hold. However, PVC, PET and styrenics markets are mostly believed to follow a stable to softer trend as prices levels are still inflated despite price decreases.
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