European PP hits new highs after 3-digit hikes for January

As players gradually return from the Christmas holidays, initial PP offers for January have emerged with 3-digit increases that sent prices to fresh highs. PP is deemed shorter than December, which supported suppliers to push their margin expansion to January.

3-digit hikes push prices to one-and-a-half-year high

Increases well beyond the propylene hike of €65/ton were widely expected, with fresh offers being revealed with hikes of €150-200/ton in most cases. Increases of €120/ton were also heard from the market as the size of hikes hinge on where prices were last month. This marked the third consecutive month of PP hikes across the region.

Hefty January hikes pushed homo-PP and PPBC inj. prices to pre-pandemic levels. According to ChemOrbis Price Index, the weekly averages of PP prices reached their highest levels not seen in around one-and-a-half-year.

These ranges may be prone to changes in line with the emergence of official prices when more players will be back to the market as of January 11.

Shortage gets serious

Import supplies have dried up as Europe lacked a premium over other markets, which also encouraged regional suppliers to boost exports in the last quarter of 2020. That is to say, there are no en-route cargos that may bring some supply relief to the market.

Data from ChemOrbis Stats Wizard reveal that PP copolymer imports to the EU27 fell by around 21% on the month to 20,840 tons in October. Meanwhile, PPH imports posted a monthly drop of 20% to 80,850 tons in the same period.

Surging freight rates amid a lack of vessel availability as well as long-lead times are likely to keep imports away in the upcoming term, meanwhile.

Demand surpasses PP supplies

Not only short supplies but also strong demand pulled prices swiftly up. Although there is a lingering holiday lull, demand for food and pharmaceutical products remained intact.

Demand in the automotive, pipe and construction industries has also been good, as a player put it.

Nevertheless, some attributed strong demand to the tightness. PP players scramble to find spot material as producers have low stock levels and are unable to meet higher requirements particularly from large converters.

Distributors’ stock levels are also low, while some of them already reported being sold out for the month due to pre-sales. Several distributors said, “Allocation cuts for another month were almost certain. Producers have short availability amid planned and unplanned outages at European plants.”

Whether new lockdown measures across the board will put a cap on price gains or not remains to be seen. Several players think that a possible slowdown in demand is likely to be counterbalanced by supply shortage.

Q1 outlook supported by supply constraints

Supply shortage is expected to support PP prices throughout the entire Q1. A sudden supply relief is deemed unlikely due to the lack of imports and regional shutdowns. As for the longer run, some participants shared firm projections, pointing to lower monomer availability due to the cracker turnarounds.

A buyer opined, “We expect PP prices to remain firm during the entire Q1 and then prices can stabilize. PP is shorter than PE and availability may remain scarce going forward.”