Is the freight rally turning the tide in Europe’s PP, PE markets in July?

Regional polyolefin markets have opened July on a stable to slightly firmer note, marking a departure from the downtrend observed over the past three months. Initial price announcements are characterized by rising freight costs and supply constraints arising from disrupted import shipments. Players assess whether the freight rally can effectively lift prices from their recent lows amid flat monomer settlements and summer lull.

Both PP and PE see rollovers to some hikes

PP prices are experiencing an upward pressure due to the shortage of imports and higher prices for non-European materials. Producers contemplate applying hikes ranging between €20/ton and €40/ton, while rollovers are also obtainable on the upper ends. This stance is supported by projections of a tighter supply outlook and firmer voices for September.

PPBC supply is a shade tighter than others amid operational challenges at regional producers and disrupted shipments from South Korea, which is by far the largest supplier to the EU27. Local suppliers have noted increased demand from buyers traditionally reliant on Asian imports.

As for PE, the scene has been similar, with rollovers to price hike attempts after three months of softening. Several producers shared their intention to adjust their LDPE prices upwards, reflecting the strain on supply chains.

Non-European PE prices have also seen hikes from the US, with July offers with September delivery seeing €50/ton hikes for LLDPE. Fresh US PE offers with delivery in October are also expected to see some gains.

Frail demand to cap July gains for some grades

Although sellers are cautiously optimistic about July hikes, buyers may push back against hikes amid flat monomer contracts and the seasonal lull. Stronger activity was observed in Italy when compared to West Europe, where players have already left for vacations.

Producers strive to stabilize prices, if not pushing them slightly up. A slight upward push is a typical strategy to achieve sustainable pricing strategies, as a player puts it. However, players exclude price drops in the near term amid a lack of imports.

LDPE may see more visible gains amid dwindling availability, while LLDPE, HDPE and MDPE grades are likely to see rollovers or smaller increases on the low end of the ranges. A Saudi producer’s HDPE inj. allocations remained conservative, which added to the prospects of slight increases from last month’s lows. Traders depleted stocks at competitive levels in June and now previous lows are expected to disappear from the market. A participant opined, “LDPE’s strength may support other grades as well.”

PE sellers also pointed to the low profit margins, justifying that there is no room for discounts during July.

In a nutshell, the upward momentum of freight rates seems to have been mitigated by stable monomer settlements and seasonal summer slowdown.

Pre-buying on the table as bullish sentiment brews for Sept

Buyers take a cautious approach when it comes to fresh purchases amid the bullish sentiment building up for September and varying comments about the size of hikes. While a few players expect 3-digit increases for September, others mostly expect more controlled hike requests in line with costs considering the ongoing macroeconomic headwinds.

Some converters contemplate additional purchases to mitigate the potential cost escalations, bearing post-summer restocking activity and the expected fall in stock levels in mind. If buyers decide on pre-buying, this may boost July demand. Plus, industry experts expect freight rates to remain elevated into 2025.

Proactive strategies such as pre-buying activities ahead of expected price increases in September may provide some support to sellers at a time when the seasonal lull leads to slowing sales. Producers aim to maintain current price levels or achieve modest hikes in July and August based on demand dynamics and monomer outcomes.