Will Europe’s PP, PE markets face another cost pass-through test in September?

Europe’s PP and PE markets are heading into September with another potential cost pass-through test after polymer prices failed to fully match higher monomer costs in August. The €55/ton increase in the August propylene contract and the €42.5/ton higher ethylene settlement prompted hike attempts across both markets, but weak holiday demand limited their implementation, leaving actual gains mostly below producers’ initial targets.

Whether this pattern will repeat in September remains uncertain. Ethylene and propylene are again expected to settle higher, supporting fresh hike attempts, while the end of the summer holidays could trigger some restocking. However, many converters already secured material in early August, raising questions over the strength and timing of any demand recovery.

August cost pass-through proves challenging

In PP, the €55/ton increase in the August propylene contract prompted producers to seek hikes of around €50/ton. Actual transactions varied considerably, with some distributors achieving modest increases while other sellers eventually retreated to rollovers from their initial targets. Occasional special deals below July levels were also reported.

PE followed a similar pattern. Traders reported increases of around €30-50/ton depending on the grade, while other transactions were concluded at rollovers or with smaller hikes. As a result, both markets moved away from the previous downtrend, but polymer gains generally lagged the rise in feedstock costs.

Seasonal demand was the main obstacle. Italy remained particularly quiet during the summer holidays, while Northwest Europe saw relatively better activity as participants returned earlier. Several converters also secured material during the first half of August, including some September requirements, reducing their need to return later in the month.

PE supply constraints lend additional support

Supply conditions were more supportive in certain PE grades, particularly LDPE. Sabic declared force majeure on LDPE supplies from Geleen after its units were shut in early August, while Borealis’ LDPE unit in Schwechat, Austria, was also taken offline for maintenance. HDPE availability was described as less ample from some Central European producers, while production constraints at an Italian supplier limited certain LLDPE and HDPE grades. LLDPE availability was also described as relatively limited, with a buyer reporting reduced volumes from a US supplier.

Import availability from the Middle East has also faced constraints. Ongoing disruptions in Saudi Arabia limited supply from the region. Meanwhile, heavy congestion at Jeddah port continues to disrupt shipments and extend delivery times, adding to uncertainty over Middle Eastern cargo availability.

These constraints placed LDPE under stronger upward pressure than other PE grades, while reduced LLDPE availability and ongoing limitations on Middle Eastern supply also lent support to the broader market. Meanwhile, PP sellers benefited from relatively limited import availability, which reduced some competitive pressure from overseas cargoes.

September restocking holds the key

Attention has now shifted to the September ethylene and propylene settlements. Market expectations point to further increases, with propylene and ethylene generally seen rising by around €20-40/ton.

If these projections materialize, producers are expected to approach September with renewed hikes. In PP, suppliers may initially target around €50/ton, although another partial cost pass-through appears more likely given subdued demand and the precedent set in August. In PE, however, tighter availability for LDPE and some LLDPE and HDPE grades could give producers greater leverage to seek increases in line with the ethylene settlement or even beyond it, depending on the grade.

Yet the key question is whether September will again see PP prices lag behind propylene, while PE may have greater scope to match or even exceed the ethylene increase. The end of the holiday season should bring buyers back to the market, and some fresh inquiries have already emerged. Still, many converters enter September with comfortable stocks after early-August purchases, which could delay meaningful replenishment until later in the month.

Accordingly, the success of producers’ hike attempts will depend heavily on whether the traditional September restocking materializes.

Imports may provide a ceiling for PE hikes

Imports could further limit the extent of potential gains. US PE cargoes for October delivery have been offered around prevailing European market levels. Although these offers are not currently aggressive, they could become more attractive if European producers push domestic prices sharply higher.

Asian flows are also drawing attention after South Korea launched its first container shipping trial through the Arctic Northeast Passage on August 22. A South Korean producer is reportedly offering some PE grades via the route, with freight costs around €30/ton above conventional shipping but an expected transit time of roughly one month rather than around two months.

The route remains experimental, but the trial highlights efforts by Asian suppliers to shorten delivery times to Europe and could eventually increase import flexibility if regular services prove commercially viable.

Geopolitical support becomes more two-sided

Logistics disruptions continue to provide some support to European sellers, with low Rhine water levels affecting inland transportation and traffic through the Strait of Hormuz still sharply below normal. Heavy congestion at Jeddah and other Gulf logistics bottlenecks are also affecting schedule reliability and import flows into Europe. However, the geopolitical picture has become less straightforward heading into September.

Renewed talks between Iran and Oman over a temporary navigational corridor through Hormuz have raised hopes that shipping restrictions could gradually ease. This has already weighed on energy markets, with Brent crude extending losses and falling below $90/bbl on August 25. Traffic through Hormuz nevertheless remains far below pre-conflict levels, meaning that the risk of renewed disruption has not disappeared.

This adds another uncertainty to the September outlook. An easing of tensions and further crude losses could weaken producers’ cost arguments, while renewed escalation or persistent shipping constraints could quickly restore upward pressure.

Will PP and PE diverge in September?

September therefore starts with a firmer cost outlook, but the degree of cost pass-through may differ between the two markets. August showed that higher monomers alone were insufficient to generate equivalent polymer gains, particularly when demand remained weak. For PP, another partial pass-through appears more likely unless post-holiday demand improves more strongly than expected. PE may be better positioned, with supply constraints potentially allowing increases to match or even exceed the ethylene movement for some grades.

The post-holiday return, buyer inventory levels and the evolving geopolitical situation will ultimately determine the extent of the gains. A meaningful restocking wave would reinforce producers’ pricing power, while a slow demand recovery, competitive imports or further easing in crude oil could limit increases, particularly if demand fails to catch up with the firmer cost picture.