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PE outperforms PP in Asia, Europe on sustained packaging demand

by Manolya Tufan -
  • 22/03/2022 (03:04)
Polyolefin players across Asia and Europe have converged on the idea that PE has outperformed PP both in terms of demand and prices. PE hikes have exceeded well above those of PP in Europe, while the extended upturn in PE prices across Southeast Asia has defied the recent softening in PP prices.

“Not only global semiconductor chip shortage but also inflationary pressures weighed on automotive and white goods sectors across the board. When compared to 2021, a slowdown in durable goods consumption seems inevitable as a part of governments’ efforts to tame inflation. This reflects into relatively slower demand for PP given certain applications in these industries.

Nevertheless, packaging applications, which form a large portion of PE consumption, remain supported by grocery and online shopping, continuing to boost demand for this product.”

PE hikes double the size of PP in Europe

Polyolefin producers closed early month transactions €100/ton above February levels, while they applied further hikes starting from the second week of March to reflect soaring upstream costs. Still, PP seems to have posted visibly smaller price gains amid inflated levels and milder buying interest.

March PP deals stand €100-150/ton above February levels as sellers applied additional hikes as the month proceeded. After a period of stagnation, buyers engaged in pre-buying activities as several producers have sold out or closed their order books for the month given the bullish April outlook. They were mostly motivated to secure additional cargoes as a hedge against further hikes rather than a confidence in demand outlook.

As seen in the ChemOrbis Market Snapshot Analysis below, PP prices in Italy have risen by around 6-7% on the month as opposed to larger gains of about 12-16% for PE grades. In West Europe, a similar panorama was observed.

*Right click the image and open in a new tab to view the full-sized snapshot.

Prices – FD Italy – Homo PP – LDPE – LLDPE – HDPE – MDPE – PPRC – PPBC

Up to €250/ton, or even more in some cases, hikes passed on PE deals, while buyers struggled to find sufficient volumes amid order stops. Converters accepted additional hike requests as it became harder to find certain grades, while they started to receive increased inquiries from their customers prior to another round of hikes.

Not only better demand for PE from food packaging, but also the disrupted import flow amid worsening logistics operations and delivery delays support sellers’ firm stance. As for US PE, European traders reported serious delivery delays amid equipment shortages and logjam at Houston port. This lured PE buyers back to the regional markets.

PE extends gains, PP weakens in SEA

When it comes to Southeast Asia, PP markets turned stable to softer after following an upward trend since early 2022. Prices were dragged down by buying resistance and projections of lengthening supply given exports and re-exports from China.

As per data on ChemOrbis Market Snapshot Analysis, overall import PP prices in Southeast Asia have indicated modest drops week over week but PE prices added to their gains.

*Right click the image and open in a new tab to view the full-sized snapshot.

Import Prices – CIF SEA – Homo PP – LDPE – LLDPE – HDPE – PPBC

A lack of availability concerns and higher exports from China emboldened buyers to expect further downward revisions on PP prices. A Thai trader said, “We don’t see any squeeze on inventories in the weeks ahead. Most players have comfortable stocks.”

In China, local polyolefin inventories moved back above 1 million tons, which along with renewed lockdowns increased sales pressure among sellers. Southeast Asian players see an increased flow of PP imports from China, which may counterbalance lower operating rates at Asian producers.

Tight supplies propel PE higher in SEA

Import PE prices sustained firming despite buyers’ resistance to high prices, while they posted larger increases than PP when compared to a month earlier levels. The main reason behind PE hikes has been tightness as buyers have been reluctant to engage in fresh purchases.

Rate cuts and container shortage resulted in less availability for PE in general, which allowed overseas suppliers to hike fresh offers further. A trader offering on behalf of a Middle East producer reported $100/ton higher offers for PE film grades. He said, “We have started offering April shipments of LDPE and LLDPE. We believe near-term prices would be firm because of the tight supply emanating from lower rates.”

A regional producer source said, “Supplies tightened especially for LDPE. We cut operation rates to 30-40% and can ramp up rates providing that crude and naphtha prices retreat to reasonable levels.”

As a side note, re-exports from China may bridge the gap in terms of supplies should Southeast Asian markets remain elevated and renewed lockdowns weigh on Chinese demand.
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