Lower parity, rising freight rates repel European polymer buyers from imports

While the year-end lethargy is in full swing, most polymer markets in Europe are poised for modest adjustments in the last month of the year. With lower monomer settlements and ongoing destocking activities, pricing strategies remain under downward pressure. Yet, some players are not excluding stability due to the reduced trading days in December, along with profitability concerns and the diminishing competitiveness of imported goods.

As for the import market, rising costs, including fluctuating exchange rates and higher shipping fees, have recently rendered non-European origins less competitive. Although import sources were rather aggressive in recent months, exacerbating the pressure on European producers during the destocking phase of the year, the increase in expenses has now shifted the balance. Market participants are closely monitoring this issue, as the declining competitiveness of imports is likely to influence the market going forward, if not already in the present.

The euro/dollar parity hovers at around 1.05. Looming tariffs following Trump’s re-election and fewer rate cuts from Fed may weigh on euro further, leading to parity with the USD. A stronger US dollar can significantly influence international trade, particularly for commodities priced in USD. When the dollar appreciates, it causes the local currency to depreciate in comparison, meaning European buyers must spend more euros to purchase the same volume of the import resin priced in US dollars. On the flip side, the fall in the euro makes exports cheaper.

PP: Eyes on S. Korean imports amid rising freight rates

PP prices are expected to post declines, albeit in smaller sizes compared to November, following €10/ton lower propylene settlement. While players have already felt the pinch of subdued downstream demand, ample supplies may also continue to put pressure on sellers, particularly if they have excess stocks to be cleared toward the year’s end.

Indeed, demand is not anticipated to surge, as the low-cost materials are set to arrive in January and lingering holiday lull will persist, thereby restraining any efforts to drive an increase in prices or activity.

Given more than comfortable prompt availability, PP buyers shared no concerns over recent hikes in the import offers, driven by rising freight rates. Plus, unfavorable delivery terms and exchange rates kept interest for imported resins thin, considering the arrival of S. Korean cargos by February next year. This approach will eventually lead to less import availability within the bloc if Asian exporters preserve their firm stance amid the cost burden.

PE: Is US destocking over?

A similar panorama can be observed in the regional PE markets, with €7.5/ton lower ethylene contract and poor fundamentals taking the center stage in December. Trading atmosphere will probably be calm in the coming months, considering the fact that buyers will be covered by arrivals from the US after year-end destocking activities. As extended Christmas breaks are being given, most US PE suppliers have advanced their shipments and eased their stock pressure to a large extent before the new year. That is to say, these cargoes will arrive gradually, proving that the supply pressure remains intact regardless of recent production hiccups in the region.

Looking ahead, imports are expected to lose their competitiveness amid rising freight rates and unfavorable USD/Euro parity. Although it remains unclear if US PE will continue to flow into the global markets at competitive levels amid impending trade barriers following the US elections and end of year-end destocking activities, this may encourage regional producers to try price hikes from February.

PVC: Lower supply eclipsed by poor consumption

Profitability concerns have remained the key driver of the market, while PVC suppliers will try to hold the market flat despite softer ethylene settlement and the ongoing supply-demand imbalance. Despite some production issues in the region and a plunge in import availability, overall availability continued to outpace demand. Suppliers pin their hopes on a potential demand pickup for the local materials after the introduction of definitive anti-dumping duties US and Egyptian PVC by early next year.

Unattractive import pricing has not caused any jitters among buyers so far, even though import volumes to the EU27 from extra-union partners staged gradual declines in July-September period. The reason why dwindling supplies have not underpinned prices can be attributed to the demand collapse across many application fields. As demand is weak enough to offset any supply constraints, players do not find any meaningful price recovery feasible in the near term.

PET: Imports lose competitiveness; no relief on horizon amid off-season

November was a month of rollovers in most cases, with some exceptions of slight discounts. The off-season remains underway in the northern hemisphere, while the lower November PX settlement is also expected to weigh on December negotiations in the run up to year-end festivities.

Although suppliers had in mind to raise their prices amid squeezed margins and uncompetitive imports, waning demand will likely have the final say. However, local sellers may keep the downturn in check with the support from rising import prices. Import PET bottle prices hovered at around €950-1000/ton CIF level, failing to remain competitive amid stronger US dollar and escalating freight rates from Far East Asia.

As it is risky to buy imports given their lack of competing power against local prices and late delivery terms, the import supply may dry up in the coming period.

Styrenics: Buyers shy away from imports amid softer voices

Finally, styrenics markets are also bracing for decreases amid weakening costs and year-end sluggishness, with shrinking demand in the automotive and other durable goods sectors. Styrene contracts came €7/ton lower following €7.5/ton lower ethylene and €49/ton lower benzene settlements. December butadiene also settled €50/ton lower from November, while only ACN indicated modest hikes for the last month of the year. Moreover, demand will wind down further given the Christmas break, pushing sellers to deplete stocks.

Apart from uncompetitive pricing amid more expensive freight rates, long lead times are repelling buyers from purchasing imports, especially given that these cargoes will arrive in February.

Nevertheless, supplies remain ample in the region. ABS demand has been weaker than PS as the local market has been hit the hardest by aggressive prices. Rising freight rates may turn the tide, leading these offers to disappear from the market in the medium term.