European PP markets on brink of a softer trend after Q1 gains

In Europe, a slew of factors capped the upward momentum of PP throughout March, rendering it challenging for sellers to implement larger price increases. With rollovers becoming more prevalent, the quarter concluded on a subdued note. PP markets are now bracing for potential drops amid unsupportive market dynamics and lower costs.

It was February hikes that pushed PP prices to a 5-month high on a weekly average, considering the cautious rebound in January and mainly stability in March. Large hike attempts of up to €40/ton faced stiff resistance in March, prompting sellers to step back. The pace of increases during this period also fell short of matching the performance seen in the same period of the previous year. Prices are widely expected to witness decreases in early Q2, as supply-demand fundamentals pressure both prices and margins.



Buyers sit on comfortable stocks

Stocks at the converter level have been reportedly ample for a while now, driven not only by lethargic demand for end applications and the imminent arrival of import cargos bought in late Q4 and early this year. There have been several delays in deliveries, considering ongoing Red Sea diversions and long lead times.

Processors avoided fresh purchases due to their high stock levels and murky demand outlook. No major improvement seems likely in the midst of current macroeconomic conjuncture, while the high season for many applications has not kicked off in March considering the embattled auto sector planning plant closures and layoffs.

April expectations are also bearish given the awaited drops in the propylene settlement, as well as other dynamics affecting supply-demand.

Import prices barely changed in March but may become more competitive

In the first quarter, regional sellers could boost their margins to some extent, supported by a lack of competitive import offers. Offers from mainstream sources including Saudi Arabia and S. Korea remained unworkable given elevated freight rates, long lead times and low euro/dollar parity, shifting interest from imports to locals.

In March, fresh offers barely changed from last month. Still, they garnered no interest given long lead times, delivery delays and unattractive levels.

However, things have changed. Import offers may regain competitiveness given lower freight rates, as well as rising euro/dollar parity. A strengthening euro against the dollar enhances the affordability of imports, simultaneously increasing the purchasing power of European consumers.

Monomer expectations, festivities shape Apr outlook

With potential cost reductions and weak demand projections, players are bracing for drops in April. Softening in spot naphtha prices put pressure on the monomer outlook amid expectations calling for €30-50/ton drops for propylene.

Moreover, April will be a short month in terms of working days amid the Easter holidays and some festivities across the bloc. Spring season may spur demand for some applications, though no major recovery is deemed as possible. Notably, projections for PP are weaker than PE, largely due to the end-use applications, particularly within consumer durables.

Still, efforts to preserve margins and enhance supply management during spring maintanence season may keep regional availability constrained, preventing prices from falling considerably.