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European PE set to face stronger pressure than PP in October

  • 28/09/2017 (10:24)
In Europe, both PP and PE players voiced firm expectations for October. They believe that the upward trend in the polyolefin markets will persist on the back of supply concerns and their anticipations of a higher outcome in both ethylene and propylene contracts.

After September PE and PP businesses were wrapped up with increases surpassing this month’s contract hikes of €30/ton for ethylene and €40/ton for propylene, demand has slowed down towards the end of the month. Both buyers and sellers are now sidelined to see the outcome of new contracts.

October ethylene and propylene contracts settled late on Wednesday with increases of €30/ton in line with the expectations, finding support from higher energy markets and ongoing cracker shutdowns. Accordingly, these increases are expected to find reflection on the downstream PP and PE markets.

However, the PE market is under a stronger pressure than the PP market due to more visible supply constraints. According to players, delivery delays that stemmed from the railway closure in South Germany have reinforced the firming trend in place. A West European producer admitted that logistics issues are mostly affecting their PE deliveries as their PP allocations are usually coming from Saudi Arabia.

Except for HDPE, LDPE and LLDPE supplies are still reported to be restricted. Some Middle Eastern suppliers have even attempted to apply additional hikes on LDPE and LLDPE during the month due to the tightness.

On the other hand, homo-PP supplies are deemed as more balanced with demand. Players think that October increases might be limited as buyers who already covered their needs might resist large increases.

A compounder from Italy claimed, “End-demand is good, but we preferred buying mostly near to prime or off spec grades. PP supplies are in balance with demand. However, we received many offers, which made us think that sellers’ stocks are high and the upward pressure is cooling off.” A different PP buyer also commented that he has the impression that producers have high stocks, adding, “We will be covered for the first 10 days of October.”

End-buyers were not seen building large raw material stocks either despite firm expectations, as they think that prices will not post major changes in October.
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