Geopolitical uncertainty shifts sentiment in Europe’s PE, PP markets ahead of August

After two months of persistent price erosion driven by weak demand and ample availability, sentiment in Europe’s polyolefins markets is beginning to shift. Although market fundamentals remain largely unchanged, renewed geopolitical tensions in the Middle East and the resulting increase in energy and feedstock costs have started to reshape expectations for the weeks ahead.

While July continues to be marked by sluggish trading activity and competitive pricing, market participants are increasingly debating whether the current downtrend is approaching its end.

The focus has gradually shifted from expectations of further steep price declines to discussions over where the market bottom may lie. Rising production costs, coupled with uncertainty surrounding future feedstock developments, have encouraged some buyers to revisit the market for September requirements, while sellers have become more confident that the scope for further reductions is narrowing. Even though demand has yet to stage a meaningful recovery, the overall mood has become less bearish than in previous weeks.

PE market sees first signs of improving confidence

The PE market remained under pressure last week as suppliers continued to concede discounts in response to weak demand and ample availability. Price reductions were mainly recorded at the upper ends of the ranges, reflecting sellers’ efforts to stimulate buying before the summer slowdown. Meanwhile, converters largely remained cautious, limiting purchases to immediate needs or relying on existing inventories.

Despite these unchanged fundamentals, sentiment has started to improve. Several suppliers have recently reported an increase in inquiries from converters seeking fresh quotations for September, with some producers temporarily suspending offers while reassessing pricing in light of rising production costs. A couple of suppliers commented, “We are receiving more inquiries as buyers seek fresh quotations for September. However, our supplier has stopped orders while reassessing prices due to the recent increase in production costs.”

The renewed geopolitical tensions and firmer upstream markets have prompted some buyers to secure part of their future requirements earlier than planned, fearing that higher costs could eventually filter through to polymer prices. Although buying activity remains far from strong, this shift suggests that purchasing decisions are becoming increasingly driven by concerns over future costs rather than expectations of further price declines.

PP market begins to search for a floor

The PP market continued to soften last week as suppliers implemented additional price reductions to encourage sales amid sluggish demand and ample supply. Converters remained largely absent from the market, purchasing only limited volumes as comfortable inventories and poor downstream orders continued to curb buying interest. At the same time, Asian import offers remained largely uncompetitive due to higher freight costs and lengthy delivery times, offering little additional pricing pressure on the local market.

Nevertheless, discussions have increasingly shifted from the pace of price declines toward the likelihood of an approaching bottom. While some traders still expect limited corrections through the remainder of July, many suppliers argue that higher feedstock costs and the prospect of lower operating rates among European producers in the coming months could gradually improve market conditions after the summer holidays. The lack of aggressive import offers is also expected to provide additional support to domestic suppliers if production costs continue to rise.

Although converters remain cautious and continue focusing on inventory management, expectations for August have become noticeably less pessimistic. Rather than anticipating another prolonged round of price erosion, many market participants now see stabilization as the more likely scenario for August, believing PP prices are approaching levels where further reductions will become increasingly difficult to justify from a cost perspective.

Rising costs reshape expectations for August

While the underlying fundamentals of PE and PP markets remain weak, the conversation is gradually shifting from falling prices to the sustainability of current levels. Demand has yet to show a convincing recovery, inventories remain comfortable, and supply is still sufficient. However, renewed geopolitical tensions have reintroduced uncertainty into upstream markets, lifting energy and feedstock costs and prompting both buyers and sellers to reassess their strategies.

As August approaches, the market appears to be entering a transition phase. If elevated feedstock costs persist and European producers respond by lowering operating rates while import competition remains limited, especially from Asia, the prolonged downward cycle that has characterized recent months could begin to lose momentum.

Although any sustained recovery will still depend on stronger end-user demand, current market dynamics increasingly point to stabilization rather than another round of aggressive price declines, suggesting that the market floor may finally be coming into view.

How much of the war-driven premium remains?

After surrendering a significant portion of their spring rally, European polyolefin prices are now much closer to their late-February pre-war levels. PE film grades currently stand only around 5-22% above pre-war levels, depending on the grade and region, while PPH and PPBC injection grades retain a somewhat larger premium of roughly 24-27%.