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European PP, PE players brace for another round of 3-digit drops in July

by Manolya Tufan - mtufan@chemorbis.com
  • 04/07/2022 (03:43)
In Europe, participants expect to see another round of sizeable drops in July following 3-digit drops in the monomer settlements. Although PE suppliers seem reluctant to cut their prices by more than the ethylene drop, PP prices will probably see decreases larger than the propylene’s outcome amid weaker sentiment.

Spot PP, PE recede by around 10-20% since May

Europe’s polyolefin markets are set to extend losses into the third successive month in July. June decreases reaching 3-digits pushed spot PP markets to their lowest levels since February-March 2021, the weekly average data on ChemOrbis Price Index revealed. Meanwhile, LDPE, LLDPE C4 film, mLLDPE C6 film, HDPE film and b/m prices retreated to their lowest levels since February-March 2022.

According to data, prices receded by around 10-15% for LDPE, LLDPE C4 film, mLLDPE C6 film, HDPE b/m, HDPE film and by 20% for PPH inj. and PPBC inj. after reversing the course in May 2022.

FD Italy – LDPE–LLDPE–HDPE–PPH–PPBC

Supply pressure is there for PP

Nevertheless, PP supplies are long and there are no signs of a demand recovery in downstream sectors heading to the summer period. Manufacturing plants usually undergo maintenance shutdowns in August. Stocks accumulated in the distribution channel as buyers mostly skipped purchases amid bearish expectations.

Aggressive import origins and stock pressure among sellers will push PP prices below certain thresholds in July. Non-European PPH emerged slightly below the €1600/ton FD threshold in June, exacerbating pressure on regional markets. Hence, the size of PP drops may exceed the propylene drop of €120/ton in July.

Suppliers will try to keep PE drops in check

PE suppliers are reluctant to issue decreases beyond the monomer’s outcome, citing recent hikes in utility costs. They also pointed to the fact that PE prices had already posted 3-digit drops despite stable ethylene contracts for June.

On the demand front, the food packaging sector is still performing relatively better than other sectors amid summer tourism and the ongoing need for staple products. This factor may help sellers limit the size of PE drops.

Still, import origins will be a factor to watch as they will put pressure on European prices if suppliers retain their aggressive pricing policies, as was the case in the past few months. What is more, supplies are ample and purchasing activity is unlikely to improve ahead of the summer holidays.

Players foresee corrections for mLLDPE

Prices for mLLDPE have further room to drop, players suggested, citing the wide gap between LLDPE C4 film prices. The gap between the two stands at around €300-400/ton in Italy and West Europe when comparing the weekly average prices on the ChemOrbis Price Index. This clearly shows that mLLDPE prices are under downward pressure after preserving a bulky premium over LLDPE film prices due to lingering tightness.
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