PP prices climb further, LDPE takes the spotlight in Europe

The pace of increases in the regional polyolefin markets is poised to accelerate as February unfolds, with fresh sell ideas indicating increases larger than those in olefins. Following the €52.50/ton increase in monomer settlements, suppliers push for even larger hikes of up to €100-150/ton, driven by their margin enhancement goals. However, the key question remains whether buyers can absorb these increases, given the ongoing stagnation in derivative markets.

The overriding theme in Europe’s polymer markets will likely be recovering producer margins via supply management efforts, permanent closures and restructuring, considering higher energy costs and murky growth expectations in Europe. The near-term outlook remains cautiously positive, with expectations of a gradual demand recovery toward spring. However, the market’s strength will largely depend on how well producers can push through their margin recovery while maintaining a balance with demand levels.

PP suppliers seek margin recovery amid calm demand

The overall market sentiment appears to be cautiously optimistic, with many producers seeking to recover their margins following a period of weaker profitability. Although a West European producer has reportedly shared hike intentions of up to €70-100/ton, which is viewed as necessary to regain profitability, distributors remain skeptical as they wait for further clarity on official offers.

Import prices remain uncompetitive given lower euro/dollar parity and still-elevated freight rates, with no imminent end to Red Sea diversions in sight despite the Gaza ceasefire, which is keeping lead times long. Hence, sellers are cautiously optimistic that larger hikes could materialize, depending on the latest transaction levels.

However, the next few weeks will be critical in determining whether initial hikes will be sustainable amid buyer resistance. Distributors have already reported that some producers are implementing increases similar to propylene, while buyers expect to pay increases even below €50/ton.

LD has more chance of seeing hikes beyond C2

LDPE draws a rosier picture compared to other polymers due to the supply limitations for certain grades. Initial offers indicated hikes of up to €150/ton for LDPE, driven by elusive supplies and sellers’ ongoing margin recovery efforts. Having sought increases of €150/ton, a supplier has reportedly stopped LDPE orders for the month of February. While this may be partially driven by a firmer outlook, it seems likely that LDPE prices will post larger gains than that of ethylene.

A source from a producer remarked, “We have implemented price increases of €80 per ton across all grades. Demand remains strong, with a substantial number of orders already received. Should demand continue to rise, we may consider further, more significant price hikes. LDPE availability is particularly constrained, as a few producers have halted orders.”

Despite larger hike requests of up to €80-100/ton, increases of €50-55/ton may pass on deals for other PE grades. A key factor in the PE market is the uncompetitive imports, particularly from the US, which is due to the higher cost of freight, logistical challenges, and firmer pricing in their own local market. This has encouraged domestic suppliers to push for margin enhancement.

PP demand lags behind PE

As for PP, February may see a patchy demand, without a major improvement in purchasing activity. While the market is currently witnessing low activity and few inquiries, stronger hikes compared to January may lure some buyers back to the market as the month proceeds. Other buyers, meanwhile, may skip purchases this month, preferring to wait for the arrival of previously secured import cargoes. PP demand is weaker than it is for PE, as a seller put it.

PP is used in packaging, the manufacture of household goods, and also in the automotive industry, which are experiencing the impact of a fluctuating European economy, marked by inflation, energy price hikes, and ongoing supply chain disruptions. Manufacturers are under pressure to optimize operations, increase efficiency, and explore cost-effective solutions to tackle lower consumer spending.

Meanwhile, PE suppliers closed their order books earlier than usual in January, preventing buyers from doing pre-puying as a hedge against future hikes. Indeed, the mood in the PE market is more upbeat, with traders reporting good buying interest in the early days of February and an expectation that prices will firm up as the month wears on.

European buyers are hoping for a more visible rebound in March and April, with some projecting stronger purchasing activity as downstream industries recover from the quieter start to the year. Inventory management and reduced supply from producers in spring may provide additional support to demand. PE is used in packaging, the manufacture of household goods, and in the agricultural sector.