The current rally could come to an abrupt halt if the situation does not get resolved before the end of Q1.
Semiconductors shortages threaten demand for polymers from the automotive industry in Europe as production plants are shutting down.
The increase in televisions, consoles, and other devices because of the pandemic caused a spike in demand for semiconductors and the subsequent shortages.
Polymers have rebounded from the lows seen earlier in 2020, staging a recovery since the summer.
But now, the potential slowdown in the most important market for engineering polymers could snap the current upward trend.
As supply became short, prices have been increasing amid resilience in demand during the second wave of the pandemic.
However, with the pandemic disrupting supply chains, semiconductors shortages threaten demand in H1 2021.
Market participants, from equipment markers to polymer producers noted recently that the shortage of semiconductors is very concerning.
It is understood that most car producers are being affected in Europe and plants are shutting.
However, since the current low supplies of polymers have left most players with low stocks, demand could continue to remain healthy in Q1.
But eventually, depending on the length of the disruptions, buying could start to retreat and ultimately place negative pressure across the polymers value chain.
Polymer demand is expected to continue to remain strong in February and possibly March, but the current upward trend could eventually turn into a retreat for many markets, such as ABS, PC and especially PA6/PA66.