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Optimism is rising on resurgent demand in European polymer markets

by Manolya Tufan - mtufan@chemorbis.com
  • 15/06/2020 (04:07)
As Europe emerges from isolation, the markets have been influenced by the optimism around post-lockdown recovery. Overall demand has started to improve after consumption in many industries dropped significantly in the past three months. Activities in all segments are lower compared to pre-virus levels and 2019, needless to say.

A return to pre-virus consumption levels will come in stages due to the ongoing pandemic. Meanwhile, demand for some applications has subsided following their peak in the confinement period.

Some sectors remain resilient on virus-induced demand

Flexible packaging, hygiene and medical applications have been among the best-performing segments since the start of the COVID-19 crisis.

Demand for food packaging and hygiene products supported certain grades of PE, while higher demand for medical applications boosted homo-PP grades. HDPE b/m sales are still good as they are used to make detergent bottles and flacons for hand sanitizers. Homo-PP grades, meanwhile, fare better than copolymers due to the robust demand for personal protective equipment versus stagnancy in the automotive industry.

Particularly packaging demand remains resilient. Yet, demand in these segments has staged a slowdown compared to April and May and it is returning to normal.

End of restrictions spurs construction works, seasonality kicks in

Construction sector has shown signs of recovery in line with the resumption of public works as well as seasonality, while the market is below pre-pandemic levels.

Converters saw an increase in their end-product business in June due to the reopening of construction sites both in Italy and in other European countries. “Gradual reopening of economies has accelerated the need for building materials,” a player reported.

Pipe makers reported seeing a boost in demand from infrastructure projects. Synthetic coverings, insulation products as well as DIY applications have seen better demand compared to the previous months.

Meanwhile, operating rates are also gradually ramped up in the agricultural film sector amid belated season as lockdown restrictions were introduced as of March.

Consumers switch to small appliances

There is a slight increase in the household electrical appliances sector as shops are opened. Moreover, people tend to spend more time at home as a result of the pandemic and they have started to cook more meals themselves.

Players pin hopes on reopening of automotive industry

Although a mostly bearish sentiment pervades the automotive market, a few players reported a staggered return of demand in some segments of the industry. A cable maker said, “We have started to see better demand from the automotive industry.”

Still, a market participant remarked, “Demand seems to have improved in the aftermath of the lockdowns as demand collapsed in April and May. Small home appliances see good demand as people continue to buy coffee makers. However, not all consumers go buy cars or fridges amid financial concerns. Manufacturers in the automotive and appliances sectors have bloated stock levels after three months of confinement.”

Social distancing promotes housewares products, two-wheeled vehicles

Players reported seeing resurgence in buying interest for housewares products in the post-lockdown period. People bought lunch boxes to carry their own food amid increased concerns over hygiene.

Demand for styrenics is also promising as more people give a chance to bicycles or motorcycles rather than using public transportation.

Hospitality to improve, disposables on the agenda again

Hospitality industry has yet to see a recovery, while incentives to boost tourism may bring some relief as summer holidays approach. This, in turn, would boost consumption of disposable utensils, single-use items as well as beverage bottles. Consumption of 0.5-1 liter bottles is gradually increasing as people start to re-emerge from isolation. Larger bottles were favored over small sized bottles during the confinement period.

Financial and hygiene concerns took precedence over sustainability, shelving anti-plastic efforts for a while.

ECB’s stimulus measures, higher euro signal recovery in Q3

Some players are hopeful about a more visible recovery in the third quarter, unless concerns over a second wave of coronavirus infections dampen the sentiment.

Economic indicators support these hopes. Central banks have taken monetary measures to prop up economies, with the European Central Bank (ECB) increasing its emergency bond-buying program to 1.35 trillion euro ($1.52 trillion).

This along with the higher euro/USD parity, which hovers around $1.13, is expected to support production within the bloc.

Reflection on polymers

June deals for most polymers are being closed with increases due to a combination of higher costs and returning consumer demand.

Increases of €40-60/ton pass on spot PE and PP deals, while PVC deals reflected the 50% cost pass through from ethylene. June ethylene and propylene contracts settled €60/ton higher from May.

As for styrenics, respective increases of €50-60/ton and €40-50/ton passed on PS and ABS deals after sellers trimmed their initial hike requests. The monthly styrene contract indicated an increase of €64/ton.

PET was the only product that followed other polymers higher with some delay in the second week of June. Sellers sought increases of €20-30/ton due to the rising feedstock prices, which are high likely to be absorbed on the low end of the ranges.

Upstream, spot ethylene has posted more visible gains compared to others due to the stronger downstream demand and lower availability. ChemOrbis Price Wizard shows that prices on FD NWE basis rose by around €60/ton since the end of May. Thus, early voices for July emerged on a firmer note despite upcoming summer holidays across the region.
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