Europe PP markets near 2-year lows, buckling under muted demand, ample supply

PP markets in Italy and Northwest Europe opened June on a stable to softer note. Following the propylene contract which settled with rollovers, regional producers announced initial offers mainly in line with the monomer outcome. However, stability started to falter as small decreases of €20-30/ton emerged later last week.

The pressure stemming from weak demand and ample availability continued to weigh on the market, pulling PP prices down for the third consecutive month. Players are now discussing whether the bottom level might be reached in June or July amid the start of summer holiday season across the board.

PPH hit €1000 FD thresholds in Italy

In Italy, the PPH market faced the strongest downward pressure with non-European origins forming the low ends of the ranges. Prices reached the €1000/ton threshold in some cases, hitting their lowest levels since August 2023, nearing two-year lows. ChemOrbis Price Indexes for overall homo-PP ranges for both Italy and Northwest Europe, meanwhile, suggest their lowest levels since January 2024.

A buyer in the automotive sector commented, “PP prices are at very low levels, and we might consider doing some pre-buying in July as the bottom is near. Plus, we expect a possible firmer trend in September as producers might try to recover their margins amid the narrowing gap between the monomer value and PP prices.”

In Northwest Europe, similar reductions of €20-30/ton have emerged while some rollovers are still in place. Nevertheless, as demand remains subdued, some producers are not ruling out the possibility of further price reductions given weak demand, ample availability and summer vacations around the corner.

Competitive imports may see renewed interest

South Korean origins have not offered a competitive edge in the past few months amidst local softening and long delivery time, with several delays reported by players.

However, recent PPBC offers showed up at €1050-1060/ton on DDP basis in Italy with delivery in late September or October following deals as low as €950/ton last week, which stood €130/ton below the low ends for prompt Northwest European cargoes in the local market. Thus, some buyers are now evaluating whether buying overseas cargoes or not now as PP prices might see a firmer trend as of September amid producers’ margins recovery targets.

Swirling question: Are there further price drops ahead or is bottom near?

Looking ahead, the PP market is expected to remain under pressure, with weak demand and ample supply continuing to weigh on prices. Many buyers anticipate further cuts as the month progresses, especially if demand does not pick up in the coming weeks, albeit at a slower pace. A distributor in Germany commented, “The approaching holiday season as well as poor fundamentals are likely to put further pressure on the market in July; hence, we expect €10-20/ton drops on top of June reductions.”

However, others have started to look for the bottom after prices reached multi-years lows.

Buying appetite might see an improvement in the upcoming weeks as the nearing bottom level might lure buyers to do some pre-buying before leaving for the summer break.

In addition, long-term expectations are calling for a firmer trend for September given restocking activities after the summer lull as well as a possible improvement in consumption amid hopes for a cautious recovery in economic conditions in Q4.