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European PP, PE markets set for 5th bullish month as shortage bites

by Manolya Tufan -
  • 22/02/2021 (03:58)
European PP and PE markets are on the verge of posting supply-driven increases moving into March, which would mark the 5th straight month of hikes. The bullish rally, which gained momentum from January onwards, is not expected to take a breather as another round of 3-digits hikes are awaited.

Prices to break above new thresholds

In February, regional suppliers closed their order books for the rest of the month on the back of severe tightness and competing demand ahead of another round of hikes. Meanwhile, some suppliers were selling small amounts of material with massive increases from the beginning of February. A participant said, “Offers are valid only for days or even hours.”

Sellers now prepare to test new highs next month. Players expect to see increases of up to €150/ton for PP and €100/ton for PE.

According to the weekly average data on ChemOrbis Price Index, PP and PE markets hit multi-year highs. LDPE prices in Italy and Northwest Europe reached their highest levels since August 2015. Spot LLDPE and HDPE film prices stand at their highest levels since May-June 2016. Meanwhile, PPH and PPBC inj. prices stand at their highest levels since July 2015.

Tightness likely to deepen in March

Participants generally voiced mounting concerns regarding the supply outlook. Regional producers’ stock levels have been critically low amid a number of plant outages, a lack of imports and robust demand. Force majeure declarations as well as upcoming maintenance shutdowns will serve to deepen tightness across the region. Ineos, ExxonMobil, Basell Orlen Polyolefins, HIP and Total will take their PP and PE plants offline between Q1-Q2 for maintenance.

Production News

Sub-freezing temperatures in the US forced many upstream and downstream units to shut down amid power outages, which is expected to curb imports in the following months. Import volumes from the Middle East and Asia will also remain elusive due to supply disruptions across the board and ongoing lack of shipping containers. Moreover, heavily congested ports and colder winter weather add to the logistical hurdles and cause delivery delays. That is to say, imports are not expected to arrive and bring supply relief in the near term despite attractive netbacks in Europe.

Several participants opined, “March may be the worst month of Q1 in terms of availability. A number of plants were taken offline at a time when supply levels were already low. It was not possible to find material in the spot market during February.”

March C2, C3 awaited higher

Monomer contracts are expected to settle with increases due to the strong energy markets and spot gains. The weekly average of spot naphtha prices hit nearly 2-year high, according to ChemOrbis Price Wizard.

Spot monomer prices carry a premium over February settlement levels, putting pressure on March negotiations. Expectations call for increases of around €50/ton for ethylene and €70-80 for propylene.

Needless to say, suppliers will approach the market with increases surpassing the awaited monomer hikes.

Supply will have the final say

Manufacturers have already lamented about not being able to reflect surging costs on their end products amid multi-year high prices. However, players mostly believe that buyers will have to pay increases as it is a matter of finding cargos in a tight market. Plus, end demand is performing well. Converters may have to reduce rates as they cannot find sufficient material to keep lines running.
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