Rollovers widely pass on Oct PP deals in Europe

October PP deals started being closed with mostly rollovers in Europe, while small hikes were reported in a few cases. Limited import availability and rising costs were cited behind the reversal after prices followed a stable to softer trend in September.

Slowing demand puts a cap on Oct hikes

Regional suppliers approached the market with hikes in line with or beyond the propylene hike, supported by reduced import flow and stronger hikes seen in non-European origins. Import prices have come nearly at par with European origins after posting hikes in the past few months. Plus, sellers reported transportation issues due to a lack of truck drivers across the region.

However, sellers had to step back from their initial hike attempts as demand has lagged behind expectations so far. Buyers mostly refused paying increases since PP prices are already elevated and they are known to be well covered for the time being. Demand for PPBC grades is higher than it is for PPH amid tightness, as a side note.

Participants have also noticed a strong slowdown in the automotive industry, with manufacturers postponing orders or halting production. A compounder said, “We expect to see a knock-on effect on other sectors as well.”

Costs squeeze producer margins

Rising utility costs and strong energy complex provide sellers with the leverage they need to push prices higher. LyondellBasell decided to implement a natural gas and electricity surcharge, which is currently set at €50/ton, to PP orders supplied after November 1.

Since other producers may follow suit, some players expect to see further hikes in November.

Imports scarce despite juicy netbacks

Logistics hurdles and sky-high freight rates remained an issue for players. Despite juicy netbacks in Europe, import supplies from Asia and the Middle East saw a decline as freight rates are too high to tolerate, eating into seller margins.

Participants foresee little chance for import supplies to improve unless shipping turmoil sees a relief. Hence, import prices are expected to retain strength and support the sentiment in Europe’s spot markets.

Although rising costs and higher imports support a firmer outlook in November, there are also stable projections considering moderate demand and elevated spot prices within the bloc.