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Europe PP, PE markets to buck global trend for 2nd month, boosting exports

by Esra Ersöz -
  • 28/09/2020 (12:19)
European PP and PE markets are poised for a stable to soft trend for a second month in a row in the wake of the expected weakness in upcoming monomer contracts. This also continues to defy the firming trend in other major markets, resulting in reduced imports into the region but boosted exports out of the region.

Europe indifferent to supply crunch as demand outweighs

The tightness in PE markets has been more prevalent than in PP markets to drive prices higher globally. Particularly the absence of US suppliers in the aftermath of the hurricane season caused widespread concerns about supply across Asia and the Middle East throughout September. However, this has had little impact on Europe’s local PE markets, although the US is an important supplier of HDPE and LLDPE for this region.

Thin demand has particularly dented the sentiment in PP and PE markets across Europe so far, along with the pressure from feedstocks. This is why Europe’s local prices have failed to follow global markets despite the reduced imports into the region.

Europe fails to reflect global firming, low netbacks ensue

Lagging behind the global trend, Europe is no more offering favorable netbacks for global suppliers. In the case of LDPE, Europe’s local market has already lost its premium over the rest of other regions.

According to some players, reduced imports and lower netbacks have helped avoid large price erosions in local prices, rather than pushing them higher in the midst of weak demand. Plus, this is likely to be the case next month given the expectations of a steady to soft outcome for next monomer contracts.

Below is the comparison of cumulative price changes for PE based on the average price of ChemOrbis Price Index between the start of August and the end of September. It evidently shows the down pressure on Europe from the ethylene monomer and how Europe PE market defied the firming trend in other countries.

A similar picture paints for PP, although the pressure here is not as prominent as it is on PE. Some plant shutdowns as well as vivid demand for certain applications are expected to prop up the PP market next month.

Export opportunities for European suppliers bolstered

This situation has caused arbitrage opportunities to arise for European suppliers. Particularly benefiting from the absence of the US, they have shifted their attention to export markets including nearby Turkey as well as China and other countries.

Turkish players have affirmed receiving more PP and PE offers than usual from Europe
and plus, they have found them competitive enough.

Traders in Europe have also confirmed exporting LDPE to China, where prices rose considerably.
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