Europe PP, PE outlook for 2025: Battle of margins amid supply surpluses and trade flow shifts
by Manolya Tufan - mtufan@chemorbis.com
by Esra Ersöz - eersoz@chemorbis.com 
Polyolefin markets began 2024 with a transportation crisis driven by Red Sea turmoil, fueling steep price gains in Q1. Prices then trended downward in subsequent quarters, with brief rebounds unable to match Q1 levels. Global overcapacity and weak demand were key factors, as producers tried to adjust output to protect margins, but with little success.
PP and PE markets end 2024 at year-to-date lows
Buying interest did not move in lockstep with typical seasonal patterns, as derivative sectors, ranging from automotive to construction, suffered significant setbacks. Other segments faring a tad better also remained below average, buckling under lower consumer spending amid high inflation. This led to an accumulating resin stocks on the sellers’ side, which coincided with the year-end destocking activity, particularly from the US for PE, and pushed both products to their year-to-date lows by the year’s end. Companies remained cautious, keeping minimal stocks amid slow manufacturing and ample availability, barring restocking activities as a hedge for early Q1.
While the overarching fragility in supply and demand remains a persistent challenge, intermittent supply shocks have occasionally driven price increases. However, these surges failed to gain lasting traction, as they lacked the necessary support from underlying demand, and once supply normalized, the upward momentum quickly dissipated. It was a year similar to 2023 in this regard.
Q1 calls for a cautious rebound
While players do not anticipate an immediate surge in demand for early 2025, polyolefin markets are broadly expected to experience a rebound during the Q1. January is likely to bring a period of stability, given the shortened working month and the fact that many converters are already covered. A significant influx of imports is anticipated to reach the EU, following the year-end destocking. Additionally, olefin contracts are expected to settle at slightly softer levels. These factors are likely to keep prices within a limited range through January, if not push them slightly lower.
The impact of the recent production hiccups within the bloc and traditional restocking activity may push prices upwards from February at the earliest, most players argued. Plus, a stronger dollar and rising freight rates made imports more expensive for European buyers, resulting in parity with the local market and curbing interest for imports. These factors will probably provide suppliers with the leverage to recover their squeezed margins to some extent.
A source from a producer opined, “We anticipate a rebound in the EU demand starting in April-May, driven by more stable financial conditions and improved market confidence.”
Margins bite, and it is now a big deal in Europe
Producers have been lamenting razor-thin or even negative margins for the past two years, following the collapse of the pandemic-driven economic bubble.
.png)
Buckle up for more plant closures
The imbalance between supply and demand is here to stay in the foreseeable future, as global overcapacity is unlikely to align with demand growth, especially since global economies are not out of the woods yet. In a bid to alleviate the pressure from prolonged supply imbalances, regional producers are likely to continue operating at lower rates, particularly given the high production costs and aging petrochemical plants in Europe, eating into producers’ profit margins.
As the continent becomes increasingly reliant on imports, regional sellers face growing difficulties in competing with cheaper imported goods, forcing them to cut production or announce broader restructuring plans.
In 2024, SABIC Europe shut its Olefins 3 cracker following a turnaround ending by mid-July. While ExxonMobil will close Gravenchon cracker and polyolefin units at the end of 2024, the company will also downsize its LDPE plant in Belgium by early next year. LyondellBasell shuttered its Brindisi PP plant by early this year due to the challenging market conditions.
LyondellBasell, BASF, Versalis, Orlen are among the producers, who revealed strategic reviews on their assets.
The challenging landscape, characterized by high operational costs, strict regulatory environments, and heating global competition, prompts more plant closures and restructuring plans. Recurring freight crises are only delaying the inevitable as the industry nears a structural and irreversible revolution.
A major market participant said, “As an integrated producer, we have the flexibility to absorb short-term losses in our polymer segment, thanks to the offsetting gains in other areas of our business. Looking ahead to 2025, we are strategically planning a capacity expansion, capitalizing on the opportunity to ramp up production on our underutilized monomer lines. This will enable us to boost sales volumes, supported by our strong integrated margins. In contrast, non-integrated producers are facing significant headwinds, with negative margins that leave them with few viable options. Many will be forced to shutter their plants if they continue to outsource monomers, as the cost dynamics remain unsustainable.”
Regarding growing imports in Europe, a market source also opined, “We are observing a shift in buyer behavior. Once cautious, customers are now increasingly willing to source imported PP and PE from the US and the Middle East, reflecting a broader market shift.”
A price war brews amid shifting trade routes
New capacity additions particularly in China : According to ChemOrbis Production News Pro, nearly 9 million tons of capacities are expected to come online globally for PP in 2025, with around 67% of new capacities being located in China. Similarly, about 8 million tons of new PE capacity is slated for 2025 across the global markets and China holds a share of more than 60%.
This influx will create a battleground for existing suppliers, forcing them to stay competitive and exerting pressure on global resin prices and availability throughout 2025, a year likely defined by the fight for market share.
The European Union remains a target for imports, with the global overcapacity situation, and the threat of tariffs further complicating the already fragile polyolefin markets in the region.
The new tariffs conundrum in Trump 2.0: The re-elected president Donald Trump has pledged to impose new tariffs on China, Mexico, and Canada. Potential retaliatory tariffs would leave a huge capacity idled as these are among the top export destinations for the US.
US-China trade war impact on Europe:If the trade relationship between the US and China deteriorates again, China could accelerate its drive for self-sufficiency in PE production or turn to other markets, potentially impacting global trade flows and prices and forcing the US to focus more on the EU, Southeast Asia, and the Middle East to compensate for their loss in China. Europe is an important outlet for US PE suppliers, following China closely with a share of around 15% in the January-September period.
US-EU trade war impact on both markets: The scenario where more US cargoes find their way to the EU is of course only valid if Trump does not apply new tariffs to imports also from the EU. Right before the election, he mentioned the possibility of imposing tariffs ranging from 10% to 20% on EU goods, which would in turn see retaliatory tariffs on US goods imports to the EU.
PP and PE markets end 2024 at year-to-date lows
Buying interest did not move in lockstep with typical seasonal patterns, as derivative sectors, ranging from automotive to construction, suffered significant setbacks. Other segments faring a tad better also remained below average, buckling under lower consumer spending amid high inflation. This led to an accumulating resin stocks on the sellers’ side, which coincided with the year-end destocking activity, particularly from the US for PE, and pushed both products to their year-to-date lows by the year’s end. Companies remained cautious, keeping minimal stocks amid slow manufacturing and ample availability, barring restocking activities as a hedge for early Q1.
While the overarching fragility in supply and demand remains a persistent challenge, intermittent supply shocks have occasionally driven price increases. However, these surges failed to gain lasting traction, as they lacked the necessary support from underlying demand, and once supply normalized, the upward momentum quickly dissipated. It was a year similar to 2023 in this regard.
As we transition into 2025, considerable uncertainty surrounds future demand. Consequently, whether the trajectory in 2025 will diverge from 2024 hinges on demand dynamics. This will be shaped by a confluence of global trends, geopolitical tensions, potential trade conflicts, and a looming competition amid the emergence of new capacities, all of which will require vigilant observation.
Q1 calls for a cautious rebound
While players do not anticipate an immediate surge in demand for early 2025, polyolefin markets are broadly expected to experience a rebound during the Q1. January is likely to bring a period of stability, given the shortened working month and the fact that many converters are already covered. A significant influx of imports is anticipated to reach the EU, following the year-end destocking. Additionally, olefin contracts are expected to settle at slightly softer levels. These factors are likely to keep prices within a limited range through January, if not push them slightly lower.
The impact of the recent production hiccups within the bloc and traditional restocking activity may push prices upwards from February at the earliest, most players argued. Plus, a stronger dollar and rising freight rates made imports more expensive for European buyers, resulting in parity with the local market and curbing interest for imports. These factors will probably provide suppliers with the leverage to recover their squeezed margins to some extent.
A source from a producer opined, “We anticipate a rebound in the EU demand starting in April-May, driven by more stable financial conditions and improved market confidence.”
Margins bite, and it is now a big deal in Europe
Producers have been lamenting razor-thin or even negative margins for the past two years, following the collapse of the pandemic-driven economic bubble.
The spread between polyolefin prices and monomer contracts have occasionally fallen to the negative territory this year, surely displaying negative margins for PP and PE producers. Not only the non-integrated producers, but also cash cost of integrated naphtha crackers, which heavily dominate the European market, suggests negative PE margins standing well below historical averages, according to C-MACC and ChemOrbis data, albeit not as deep as for non-integrated producers.
.png)
Buckle up for more plant closures
The imbalance between supply and demand is here to stay in the foreseeable future, as global overcapacity is unlikely to align with demand growth, especially since global economies are not out of the woods yet. In a bid to alleviate the pressure from prolonged supply imbalances, regional producers are likely to continue operating at lower rates, particularly given the high production costs and aging petrochemical plants in Europe, eating into producers’ profit margins.
As the continent becomes increasingly reliant on imports, regional sellers face growing difficulties in competing with cheaper imported goods, forcing them to cut production or announce broader restructuring plans.
In 2024, SABIC Europe shut its Olefins 3 cracker following a turnaround ending by mid-July. While ExxonMobil will close Gravenchon cracker and polyolefin units at the end of 2024, the company will also downsize its LDPE plant in Belgium by early next year. LyondellBasell shuttered its Brindisi PP plant by early this year due to the challenging market conditions.
LyondellBasell, BASF, Versalis, Orlen are among the producers, who revealed strategic reviews on their assets.
The challenging landscape, characterized by high operational costs, strict regulatory environments, and heating global competition, prompts more plant closures and restructuring plans. Recurring freight crises are only delaying the inevitable as the industry nears a structural and irreversible revolution.
A major market participant said, “As an integrated producer, we have the flexibility to absorb short-term losses in our polymer segment, thanks to the offsetting gains in other areas of our business. Looking ahead to 2025, we are strategically planning a capacity expansion, capitalizing on the opportunity to ramp up production on our underutilized monomer lines. This will enable us to boost sales volumes, supported by our strong integrated margins. In contrast, non-integrated producers are facing significant headwinds, with negative margins that leave them with few viable options. Many will be forced to shutter their plants if they continue to outsource monomers, as the cost dynamics remain unsustainable.”
Regarding growing imports in Europe, a market source also opined, “We are observing a shift in buyer behavior. Once cautious, customers are now increasingly willing to source imported PP and PE from the US and the Middle East, reflecting a broader market shift.”
A price war brews amid shifting trade routes
New capacity additions particularly in China : According to ChemOrbis Production News Pro, nearly 9 million tons of capacities are expected to come online globally for PP in 2025, with around 67% of new capacities being located in China. Similarly, about 8 million tons of new PE capacity is slated for 2025 across the global markets and China holds a share of more than 60%.
This influx will create a battleground for existing suppliers, forcing them to stay competitive and exerting pressure on global resin prices and availability throughout 2025, a year likely defined by the fight for market share.
The European Union remains a target for imports, with the global overcapacity situation, and the threat of tariffs further complicating the already fragile polyolefin markets in the region.
The new tariffs conundrum in Trump 2.0: The re-elected president Donald Trump has pledged to impose new tariffs on China, Mexico, and Canada. Potential retaliatory tariffs would leave a huge capacity idled as these are among the top export destinations for the US.
US-China trade war impact on Europe:If the trade relationship between the US and China deteriorates again, China could accelerate its drive for self-sufficiency in PE production or turn to other markets, potentially impacting global trade flows and prices and forcing the US to focus more on the EU, Southeast Asia, and the Middle East to compensate for their loss in China. Europe is an important outlet for US PE suppliers, following China closely with a share of around 15% in the January-September period.
US-EU trade war impact on both markets: The scenario where more US cargoes find their way to the EU is of course only valid if Trump does not apply new tariffs to imports also from the EU. Right before the election, he mentioned the possibility of imposing tariffs ranging from 10% to 20% on EU goods, which would in turn see retaliatory tariffs on US goods imports to the EU.
In both cases of a trade war, US PE sellers are facing larger risks of losing shares around the globe as the world’s largest PE exporter. If US PE fails to maintain its presence in Europe, Middle Eastern and South Korean sellers would happily fill the gap. Even China, readying to be the world’s largest PP exporter in a couple of years, has already raised its PP exports to the EU this past year despite elevated freight rates.
More free plastics news
Plastic resin (PP, LDPE, LLDPE ,HDPE, PVC, GPS; HIPS, PET, ABS) prices, polymer market trends, and more...- PP, PE players in China, SE Asia discuss post-CNY outlook
- Asian ABS markets face renewed drops as weak demand persists into Jan
- China’s PE markets on soft note amid weaker demand, falling futures
- Global PP and PE sellers approach Türkiye with hikes for January
- European PP and PE markets start 2025 on a stable to slightly firmer note
- Global spot styrene markets open 2025 on divergent paths
- New year opens with mixed trends in China’s PVC markets
- China delays major PP, PE startups as expansion plans hit roadblocks
- Stats: Türkiye’s total PP and PE imports down year-on-year in January-November
- PP markets quiet in China; sellers pin hopes on pre-CNY demand