PP resumes downtrend after short break in Italy and West Europe

Regional PP markets had rebounded in H2 August or September after 4 straight months of drops and followed a mostly firmer trend in the past two months. However, PP markets resumed downtrend as November kicked off amid lower propylene settlement and deteriorating market outlook towards year-end.

November offers down by €20-40

Despite earlier attempts to recover their margins, sellers had to concede to decreases varying in size due to the weak demand outlook and comfortable supplies. They have issued small drops of around €20-40/ton on their PP offers, avoiding decreases surpassing the propylene drop.

In West Europe, prices turned down in November after posting cumulative increases of 11% in the past two months, ChemOrbis Price Index showed.

Since PP prices in Italy rebounded in late August, they posted larger increases of 17-22% when compared to late July levels before levelling off in November.



Buyers push for further discounts on deals

Converters have pushed for larger decreases in line with the propylene settlement on deals, while others continue to stick to the sidelines before fresh purchases.

A market source remarked, “We had to step back from our initial offers that stirred no buying interest. Overall demand is muted, but we noticed slightly higher price inquiries. Buyers may have decided to replenish their stocks after skipping purchases in October.”

Those converters having a hard time receiving orders from their customers prefer to wait for the latter half of November so they can obtain larger discounts. One of them opined, “Spot PPH prices may break below the €1100/ton FD level as the month wears on.”

November sales will be better than Dec

The majority of players concurred that December will be a weak month in terms of demand due to the shortness of the month amid year-end festivities. It will not be wrong to say buyers may decide to ensure meeting their requirements for January from November. Indeed, some sources even reported that poor order entries at the converter level may prompt manufacturers to shut for longer than usual this year, which would curb December needs further. Hence, December calls for a stable to softer trend for the time being.

What lies ahead?

PP markets will likely remain under a downward pressure amid weak market fundamentals in the near term. Sellers’ efforts for margin expansion seem to have proved unworkable, while PP deals may be closed with larger decreases than propylene.

As for the longer term, it remains of utmost importance for players to monitor upstream costs vigilantly amid the Middle East conflict leading to sharp fluctuations in crude. Apart from the cost side, supply management will gain more importance as it can recalibrate the outlook for early 2024.

Profitability and market conditions hold a pivotal role in shaping operational strategies. Rationalisation may be the new normal throughout 2024 so long as consumption remains pressured by economic headwinds, proving how fragile market equilibrium really is. According to industry sources, producers will keep operating rates attuned to the demand conditions amid a challenging economy that eliminates the potential for a swift demand recovery.

Last but not least, buying behaviour post the pandemic has shifted due to the prevailing economic environment, with consumers significantly reducing their spendings on durable goods including electronics and furniture. Participants do not expect to see a major change in demand for PP applications before economies return to growth.

PP is used in packaging, the manufacture of household goods, and also in the automotive industry. Block copolymer is widely used in the production of industrial products, such as dashboard, automotive interior decorations, bumpers, as well as the interior and exterior parts of washing machines.