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Will it be supply or demand to set PP, PE outlook in Europe?

by Manolya Tufan - mtufan@chemorbis.com
  • 19/10/2020 (03:56)
The sentiment in European PP and PE markets shifted as of mid-October as overall supplies dwindled amid the lack of imports, regional production glitches and boosted exports. Players suggested that decreases may come to a halt going forward, while November expectations call for a stable to slightly firmer trend.

Further drops in H2 Oct deemed unlikely

October deals have been closed with rollovers to small reductions for both products. Meanwhile, suppliers have renewed confidence recently and they are not open to give further discounts during the rest of the month.

Prices are believed to have no further room to drop due to a combination of poor netbacks in Europe and diminishing availability amid regional shutdowns and lower import supplies.

A reversal in Nov under discussion

Sources expect European polyolefin markets to align with the global markets after following a stable to softer trend for the second straight month. PP and PE prices are likely to stabilize or even rebound slightly. Rising monomer costs amid maintenance shutdowns and diminishing downstream supplies are blamed for the reversal expectations for November.

Having noticed overall supplies are not as ample as before, a PP converter reported, “We decided to buy extra volumes out of fear that we may not find required volumes later on. Even small increases may be seen next month.”

Regional production updates

Sources reported that overall PP availability is diminishing due to maintenance shutdowns including Braskem and SABIC’s plants. LyondellBasell declared force majeure on PPRC supplies from Brindisi, Italy. Meanwhile, Total’s PP force majeure in France was still in place.

When it comes to PE, players reported limited availability for certain grades. Total declared force majeure on mLLDPE output from Belgium, while LyondellBasell reportedly faced production issues at its LDPE plant in France. Although not widely confirmed by primary sources, SABIC reportedly shut its LDPE plant in the UK for maintenance work.

Producers also accelerated export sales to Turkey, China and the US in the past months due to weak regional demand. Although these led to reduced supply levels inside Europe, supplies are believed to be in balance with demand for the time being.

Outlook torn between demand and supplies

Contrary to the shifting sentiment among sellers, demand remains as the main concern as it has signaled no immediate recovery. What is more, players are concerned about the underlying demand due to a number of countries renewing restrictions to battle with the spread of the virus. Therefore, buyers rule out the possibility of seeing increases next month.

To sum up, the November outlook is torn between tepid demand and diminishing supplies. Players are discussing which one of these fundamentals will come to the fore in determining the price trend.

A buyer said, “Our demand is good for the time being, while we do not know how long this will last amid rising virus cases. Consumers would cut unnecessary expenses if the situation deteriorates.”
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