Europe’s PP, PE and PVC markets return from holiday on a bullish note

As August draws to a close, participants in the PP, PE and PVC markets have started to return to their desks in Europe following the long summer break. September expectations are developing on the bullish side, driven by the possible hikes in monomer contracts, easing stock pressure as well as hopes for vivid replenishment activity.

Although sharp contractions in business activity and the deepening recession fears kept players on their toes, sellers see glimmers of hope from the global firming, buyers’ return to the market and tight producer margins amid higher costs. This applies to all commodity polymers as a mostly bullish sentiment has prevailed heading towards September.

PE rebounds from multi-year lows

PE took the lead in the bullish run and prices rebounded from two and a half to three-year lows in early August despite stable ethylene contracts. Deals were closed with rollovers to increases of up to €100/ton depending on the grade, with LDPE and HDPE prices posting larger gains. While LyondellBasell and SABIC reportedly closed their order books for LDPE, limited import supplies sent HDPE prices higher. Some buyers engaged in pre-buying activity to hedge against further hikes.

September ethylene contracts are expected to settle €50-80/ton higher. Apart from the cost side, dwindling supplies and a nascent demand recovery reinforced the firmer stance among sellers. Producers lamented poor margins, pointing to the fact that resin prices sank to critically low levels as opposed to the strengthening upstream markets.

That is to say, PE prices will add to their gains as sellers aim to compensate for their previous losses and seek up to 3-digit hikes. To what extent initial hike requests will be absorbed will hinge on derivative demand and supply levels.

Italy’s PP market follows PE higher

West European PP markets mostly followed a stable trend in line with the propylene settlement, while PP markets in Italy reversed direction in H2 August, with PPH offers below the €1000/ton FD level fading. Despite the summer lull, deals were closed with increases of around €50/ton in Italy, where players gradually returned to the market to meet their requirements.

Accordingly, Italy’s PP market shifted direction after prices hit their lowest levels since late 2020 during a 4-month slide. Not only lower supplies amid run rate cuts and other disruptions but also voices for further hikes played a key role in setting the tone of the market.

Propylene contracts are expected to settle €70-80/ton higher, exerting further pressure on the downstream PP. This has cemented the firm outlook, with producers voicing their intentions to seek hikes of up to 3-digits owing to tight margins and supply limitations.

Yet, hefty hikes may be hard to attain due to the low consumption in derivative markets. Supply outpaces demand in terms of end products across many sectors, as a major market participant put it.

PVC players cautiously optimistic about Sept

August has been a mostly stable month after PVC markets have fallen for four straight months. Limited drops were seen on the upper ends of the ranges due to lacklustre demand, however.

Expectations for notable hikes in the next ethylene settlement encouraged sellers, who aim to avoid margin losses amid high monomer values and unsupportive caustic soda prices.Reduced US availability as well as Europe’s narrowing premium over other global markets may also lend support to the sellers. Lower run rates are also here to stay unless Europe’s export markets rise further amid rising resin requirements. Although firmer voices were yet to spur buying interest, restocking needs and uncompetitive import prices may lure buyers back to the spot market.

According to some players, these factors will trigger a shift in direction and producers may seek hikes in line with the half of the ethylene’s outcome or beyond that level to improve their margins. Still, others remained cautious as these attempts may be thwarted by weak underlying demand in end markets, which do not seem promising for the rest of the year.