Flimsy demand keeps PP, PE outlook softer in Europe

The polyolefin markets faltered under a weaker sentiment post the summer, unable to maintain the modest gains achieved over the past two months. Indeed, initial hike attempts failed to pass on September PP and PE deals due to sluggish demand and lower costs. Although rollovers were still reported in a few cases, most players closed their deals with small decreases of €20-30/ton in line with the monomer settlements.

Meanwhile, players shared their expectations for October on a softer note amidst weaker projections for the monomer settlements as well as no signs of improvement in demand for the last quarter of the year.

Producers struggle to expand margins

Suppliers had to revise their initial hike targets down to rollovers or concede to some reductions in the PE market amid buyers’ resistance. LDPE prices remained mostly on a stable to slightly softer note compared to August, while HDPE, MDPE and LLDPE grades saw decreases of €20-25/ton. The main reason behind downward adjustments were slack demand and a nascent easing of supply conditions, despite ongoing turnarounds and production issues in the region.

In the PP market, meanwhile, rollovers to increases started to fade in the second half of the month and reductions of up to €30/ton compared to last month surfaced as the month wore on. Players lamented sluggish demand amidst buyers’ high stocks as well as unsupportive economic conditions, especially in the automotive sector. A distributor in Germany commented, “The economic situation is very bad, and it is not likely to improve in the near term. PP prices are set to drop for another month as demand might remain stagnant.”

October hints at downtrend on costs, demand

Market participants widely agreed on the fact that both PP and PE markets are likely to see renewed decreases going forward. They pointed to the weakness in demand and waning cost support, with the next ethylene and propylene contracts awaited €20-40/ton lower. The pressure stemming from slack demand is likely to outweigh supply limitations that are still being felt across the bloc.

Meanwhile, converters are expected to continue limiting their fresh purchases amidst slack derivative markets heading towards the year end. Some players think that decreases beyond the potential drop in the monomer settlement might pass on PP deals as the market performs worse compared to PE.

Buyers avoid imports on softer outlook

South Korean and Saudi Arabian PPH offers were lastly reported at €1180-1190/ton on DDP basis with delivery in November, while South Korean PPBC was at €1250/ton with the same terms. Although those offers stand below the current local ranges, they did not grab buyers’ interest considering that the local market is expected to drop in the near and medium term.

As for PE, US LDPE offers emerged at €1220/ton on DDP basis with delivery in November but the gap with regional prices was deemed too narrow to be appealing. In addition, traders have also confirmed that US prices are not so competitive given strong demand inside the region.

In Italy, spot ranges were last assessed at €1220-1320/ton for PPH inj., €1280-1380/ton for PPBC inj. and at €1330-1430/ton for PPRC inj., all on FD, 60 days deferred payment basis. In West Europe, spot ranges were €20-40/ton above those in Italy. In West Europe and Italy, price assessments stood at €1260-1330/ton for LDPE film, €1160-1250/ton for LLDPE C4 film and at €1200-1300/ton for HDPE film, all on FD, 60 days deferred payment basis.