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Polymer markets face one of most chaotic times

by Merve Sezgün -
  • 18/02/2021 (09:57)
Global polymer markets have been grappling with a dearth of supply since early Q4. Planned and unplanned shutdowns coupled with a deepening shipping crisis in the aftermath of an unexpected surge in demand have contributed to rapid price hikes in major regions. Prices for PP, PE, and PVC have more than doubled from the middle of last year.

Just when players were starting to expect a relief in supplies and prices, the markets were rattled by the news of freezing temperatures and power outages in the US early this week. A number of US producers were forced to declare force majeure on PE, PP, and PVC outputs from their plants in Texas. These unplanned production outages will add to the problems of an already tight market.

“Overall demand for most polymers has disregarded seasonal patterns since last year and markets have seen a pandemic-inspired appetite amid major countries’ massive monetary injections. On the other hand, supplies have been significantly affected by the global shipping turmoil and unplanned shutdowns across the globe. Polymers are facing one of the most chaotic times,” players explained.

Price hikes unstoppable across globe

Amid a fresh round of force majeure declarations in the US, the approaching turnaround season in Asia, and the planned shutdowns in the Middle East, the price rally seems to be unstoppable at least for the near term. Strong crude oil also boosts sentiment for polymers.

High freight rates, meanwhile, continue to keep prices elevated particularly in the countries which are mostly dependent on imports.

Prices that have been hovering around multi-year highs have chalked up fresh gains this week in the aftermath of the force majeure news from the US. The largest increases were recorded in the PP markets.

Turkey: Buyers nibble at purchases amid soaring prices, lack of supply

After the unprecedented hikes of around $250-300/ton amid short supplies last week, the PP rally in Turkey has not lost much momentum so far. At the time of publication, homo-PP raffia prices for Middle Eastern origins were up by more than $100/ton from last week to breach the $1700/ton CIF threshold.

“The latest FM declarations in the US will add to global tightness in supplies. We do not expect a relief in supplies over the near term also due to the planned shutdowns in Saudi Arabia for March, a lack of fresh offers from Iran and vivid demand in the US as well as Europe,” opined sellers.

Meanwhile, sharp hikes have been absorbed since last week as stocks levels on the buyers’ side are also low. “Offers started to be talked for March and they were for a few containers in most cases. It is not possible to find material for February,” lamented a converter.

Import PE prices in the country also continue to see sizable hikes, particularly for LDPE film. Robust demand coupled with high netbacks in Europe and America has kept volumes quite restricted to Turkey.

Latin America: Homo-PP offers above $1700 CFR Brazil appear

With the supply tightness exacerbated by the recent force majeure declarations in the US, prices have extended their gains into this week. PP has seen more visible hikes when compared to PE and PVC, players noted.

Homo-PP offers on CFR Brazil basis were largely reported at around $1700/ton, up around $100/ton from early February. Offers much above this level were also heard in a few cases. A few players noted that some suppliers were seeking levels as high as $1800-1900/ton CFR West Coast South America. “Homo-PP prices may breach the $2000/ton CFR level considering soaring spot propylene prices,” they added.

PE and PVC prices, meanwhile, did not record any major changes this week. However, fresh offers for March are expected to be announced with visible hikes as supply from the US will be tighter.

Europe: March PP, PE, PVC expectations call for further hikes

In Europe, regional PP and PE suppliers closed their orders for the rest of the month as early as the second week of February amid an acute shortage. Sellers were either sold out or stopped orders with demand surpassing overall supply levels.

March expectations call for another round of supply-driven increases both for PP and PE. Apart from regional tightness, imports may not be resumed next month due to the ongoing logistical challenges and equipment shortage.

As for PVC, February deals were mainly closed with increases of up to €70/ton amid tightening availability and robust demand. With the support from strong market fundamentals, players are bracing for another round of increases in March regardless of the change amount in the ethylene settlement.

Southeast Asia: Indonesian producer lifts PP prices 4 times this week

Despite the ongoing holiday lull across the region, an Indonesian producer increased PP offers to the local market four times this week due to tight supply and rising crude oil futures. The producer’s total hike amount for homo-PP raffia and injection reached $100/ton.

A converter in Thailand, meanwhile, reported that domestic PP prices surged around $100-133/ton from last week.

Import offers into the region were quite limited in number. Players expect to receive fresh offers in the days ahead while they agree that prices will be higher.

China: Players will return from holidays to a bullish market

Amid soaring prices across the globe, China’s polyolefin markets are set to return from holidays with fresh hikes. Suppliers have already started to express higher sell ideas for China due to deepening supply issues and strong crude oil futures.

Demand from the country, meanwhile, is expected to be supportive in the post-holiday period. “Downstream factories are likely to be able to resume operations right after the official holidays since millions of workers were told not to travel this year due to the pandemic. Hence polyolefin demand from China may return earlier than expected this year,” players reported.

China has been the least affected market by the astronomic hikes in freights as its robust export performance as well as rising domestic capacities particularly in PP, HDPE, and LLDPE has helped keep price hikes relatively in check. As a result, there has been a widening price gap between China and other markets since the freight issue started in Q4.
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