December 10, 2020
Buyers are seeing spot offers as high as €100/mt as availability decreases.

PP prices in December are rallying in Europe with spot deals valued much higher than last month as availability decreases. Buyers attempt to secure volumes on expectations of a tighter market and higher prices in Q1.

Higher spot numbers

The spot market has changed since November, from low prices amid plenty of supply to tight availability and much higher prices.

The polypropylene (PP) market was still oversupplied only a few weeks ago. But the picture has now changed.

After the small increases in the monomer price in December, PP contracts look set to follow in this direction.

But spot prices raced ahead. Offers are now €70/mt or even €100/mt higher for the lowest priced accounts.

However, for those players that were already on high levels, the increases are around plus €30/mt.

Overall support

The support likely comes from several factors. Demand for instance has remained strong, which is unexpected during a period when normally destocking takes place. Then the strong Chinese market eased imports to Europe, helping to reduce availability.

And production glitches reduced availability further. But confirmation of this was not available.

However, the reality is that the PP market in Europe has turned from oversupply to tightness in a matter of weeks.

Moreover, it appears that buyers are now rushing to secure volumes, further amplifying the shortage.

It could be that the current rally is artificial, more a result of panic and restocking than underlying strong demand. Some key segments such as automotive and even packaging do not show such spikes in activity.

Downside risks

If car sales continue to slow, and the pandemic starts to hit consumption elsewhere, then demand will slow and put an end to the current upward trend in PP prices.

But in December there were no signs of an ease in demand. The PP market for now looks set to end the year on a high note for producers. And this upward momentum looks like it will probably continue in January.