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Will initial November hikes for PP prove workable in Europe?

by Manolya Tufan - mtufan@chemorbis.com
  • 08/11/2021 (02:41)
In Europe, PP suppliers have approached the market with increases in line with or beyond the propylene hike of €95/ton, which has baffled market participants. Producers sought 3-digit hikes for November, citing rising upstream and utility costs. Yet, this was met with raised eyebrows by some participants given moderate demand and comfortable availability.

More offers awaited as the week proceeds

November discussions have been slow-evolving, with participants waiting for more offers to emerge in the following days. The propylene hike obviously caught many buyers by surprise as they were expecting smaller hikes.

Initial PP offers emerged with hikes ranging between €95-100/ton and €120/ton over last month, while even larger hike requests may be seen later in the week due to the rising energy costs. Several regional producers had in mind to implement an energy surcharge of around €50/ton on top of the monomer hike.

The market will be discussing the feasibility of a pass-through of utility costs as the month proceeds, players suggested.

Frail demand to weigh on downstream manufacturing

Although packaging sectors continue to perform well, demand from other sectors including household items and gardening has tapered off. The automotive sector has staged a visible slowdown, leading to accumulating stocks of industry related materials. Meanwhile, steep November hikes may curb buying appetite further heading into the year-end festivities. Plus, those buyers, who have pre-bought in late October, may skip November purchases.

A household items manufacturer said, “We are covered as we secured large stocks late last month. Plus, we have noticed demand for end products is slowing. Downstream orders are at risk of being canceled or pushed out, considering higher resin prices. This in turn may force some manufacturers to stop production in the future.”

Supply-demand may keep Nov hikes in check

Needless to say, European PP markets have been hovering at all-time highs. This is why some distributors are doing back-to-back business as they find it risky to stock up at inflated levels. Hence, the absorbability of strong hikes is a matter of concern among players particularly when it comes to the upper ends of price ranges.

Sellers mostly expect the entire monomer hike to pass on deals amid firm stance on the producers’ side to avoid any margin erosion.

However, others think that moderate demand and comfortable supplies will serve to keep November hikes in check and smaller hikes of €60-80/ton may pass on deals.

A distributor of a West European producer said, “As for November, €70/ton increases are likely to pass on deals as the month proceeds despite our initial hike requests of €95/ton as prices are still inflated.”
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