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Triple-digit hikes send Europe’s PP market to fresh all-time highs

by Manolya Tufan - mtufan@chemorbis.com
  • 12/04/2021 (04:01)
In Europe, the rally did not take a respite from large increases as initial April offers emerged with €200/ton hikes or more. Prices hit fresh all-time highs amid deteriorating supply situations. A nascent resistance, right now, is building up on the buyers’ side as massive hikes hamper buying appetite.

PPH prices hit historic highs at €2100 FD NWE

Overall PP supplies have diminished further amid regional production outages as well as the lack of imports. Stock levels inside Europe have already been critically low ahead of the spring maintenance, which take place between April-May. Less imports arrived in Europe despite juicy netbacks amid ongoing logistical hurdles, which were reinforced in the aftermath of the Suez blockage.

This prompted producers to push for further margin expansion as prices indicated increases of around €200/ton, well beyond the propylene hike of €45/ton, and hit historic highs.

Accordingly, spot PPH and PPBC inj. prices were assessed €150-200/ton higher respectively at €1950-2100/ton and €2000-2150/ton FD NWE, 60 days last week. In Italy, prices were assessed €100-150/ton higher at €1900-2050/ton for PPH and €1950-2050/ton for PPBC inj. FD, 60 days.

Peak may have been reached, resistance builds up

Sellers point to the low demand as a result of the large increases, which have deterred buyers from purchasing. Some converters refuse paying such hefty hikes and prefer to shut their lines. Others point to the awaited slowdown in the car industry amid the lack of semiconductor chips and other components.

“We have closed some April deals with €200/ton hikes from March due to the shortage. However, we have noticed a slowdown in demand as many buyers refused paying such hikes. Manufacturers in the construction and packaging sectors opted for halting their lines instead,” a trader noted.

Mounting resistance on the buyers’ side toward multi-year high PP prices is set to prevent prices from rising further, players reported, addressing concerns over the demand outlook amid talks of solvency problems.

Supply relief expected with more imports to Europe

After grappling with an acute shortage for quite a while, players expect to see improving supplies next month amid returning capacities. With prices being much higher than other regions, more imports are likely to find their way to Europe, particularly from Asia.

As can be seen from the below graph, the USD equivalent of spot PPH inj. prices in Italy stand well above other markets.



Current import offers are due for delivery in June-July. Players find it risky to engage in long distance cargoes as they are wary of a reversal of the PP trend before the arrival of imports.

Competitive NE Asian PPH weighs on other markets

Relentless hikes sent PP prices across major markets soaring in Q1, which in turn harmed buying appetite but rendered import-dependent markets attractive.

Chinese producers ramped up exports to higher netback regions including Turkey, South America, Southeast Asia and Egypt to cope with the frail demand at home. Chinese PPH emerged at aggressive levels and intensified pressure on other origins in Vietnam, Egypt and Turkey.

That is to say, more import flow from Asia and the Middle East may be observed going forward despite high transportation costs so long as European price levels remain elevated.
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