European PP increases set to lose momentum in March

Following a cautious rebound in January, the uptrend in regional PP markets gained significant momentum this month. However, as the market approaches the end of Q1, upward movements are likely to decelerate, considering the resistance starting to build up and more moderate expectations surrounding monomer settlements.

Feb hikes push PPH and PPBC to nearly 5-month highs

By mid-month, local PPH and PPBC injection prices in both Italy and West Europe hit their highest levels since late September 2024. This followed February deals, which were mostly closed with increases of €50/ton, matching the propylene hike, and/or €80/ton. Meanwhile, large hike attempts of up to €100/ton met with stiff resistance, forcing PP sellers to revisit their offers as the month progressed, despite new supply challenges.



PP to extend gains into 3rd straight month

PP producers are motivated to improve their margins, citing higher conversion costs, a lack of competitive import offers and regional output disruptions. Fresh offers for S. Arabian and S. Korean materials remained unviable given still-elevated freight rates, long lead times and low euro/dollar parity, lending some support to the regional PP producers.

Meanwhile, overall PP supplies are not ample given production hiccups in the regional markets. Total’s PP plants in Gonfreville and Feluy are under force majeure, while there will also be some spring maintenance shutdowns in Central Eastern Europe in the coming months.

These factors are expected to support sellers in their pursuit of another round of price increases next month, while the scale of potential hikes remains a topic of debate, with divergent perspectives on demand and tempered expectations for March olefin contracts.

Volatile naphtha blurs outlook

Spot naphtha prices have been volatile, mirroring fluctuations in crude oil markets that have hit two-month low recently amid poor economic data and trade concerns. By mid-month, naphtha prices on CIF NWE basis were reported slightly lower, indicating a drop of $15/ton compared to a month ago, according to ChemOrbis Price Wizard.

Despite that, spot propylene prices on FD NWE basis rose significantly, surpassing the €1000/ton threshold for the first time since mid-April 2024. This increase was largely attributed to regional shutdowns, which reduced supply and pushed prices higher.

The volatility in naphtha pricing, however, has created a less bullish outlook for the monomer settlements. As a result, the upcoming propylene settlement may see incremental hikes of €20-30/ton, even if others still expect hikes of around €50/tons given spot propylene’s strength during the month.

Demand remains an issue

PP demand has been slower than PE. Buyers are mostly covered thanks to their late Q4 purchases from the import market, and they will continue to purchase their basic needs. Although some players pinned their hopes on a seasonal uptick for certain applications, it may be still early to see a broader improvement across the downstream sectors.

Europe’s largest economy, Germany, saw its gross domestic product (GDP) contracting by 0.2% year-on-year in the fourth quarter of 2024. The country’s economy also shrunk by 0.3% in the third quarter of 2024, following growth rates of 0% and minus 0.2% in the second and first quarters, respectively.

Many companies are struggling across the region given hard times in the automotive sector, which plays a significant role in the chemical sector.

Indeed, the European chemical industry is facing an increased number of plant closures and strategic reviews, with urgent action needed to restore its global standing. Persistently weak demand and high energy costs give petrochemical producers having operations in Europe little room for manoeuvre, let alone regulatory burdens, rising global competition and a lack of competitiveness.

March hikes may be smaller

Hikes in line with the propylene settlement are expected mostly, as buyers sit on high stocks and purchases are mainly based on urgent needs. Hence, the market is not strong enough to support producers’ margin enhancement targets, preventing hikes beyond the potential increase in the March propylene settlement from passing on PP deals.

A seller opined, “March might see increases, but we are skeptical about demand as there is not enough support. There may be small increases or even rollovers in deals.”