PP could remain supported in Q2 after hovering around €2,000/mt in early April, having climbed steadily and more than doubling since the slump earlier in 2020. As prices have now reached record highs, many market participants believe a peak has been reached and a downward correction is possible in May. However, some aspects of the market remain unresolved, raising expectations of further upward pressure on prices.
In the past few months, a combination of factors supported polypropylene (PP) prices, such as very strong global demand, especially in Asia, tight availability because of production issues affecting not only costs but polymer supplies, the cold weather in the US, and shipping disruptions which were made worse by the recent incident in the Suez Canal.
Expectations of a retreat in prices in the short term is supported by better market conditions in the US, competitive offers from Asia, and an ease in shipping disruptions as the Suez Canal is no longer an issue.
While some relief in the current tightness will happen as the US industry recovers and the Suez Canal impact disappears, there are many lingering factors which could prevent any retreat in the short term.
Demand will likely remain healthy from all market segments, including packaging, consumer goods, and automotive, despite the semiconductors shortages. Shipping disruptions will continue because of the ongoing lockdowns, keeping costs and delivery times elevated. PP could remain supported also because uncertainty coupled with extremely short supply and good demand will probably fuel panic buying and stock building, ensuring ongoing upward pressure, possibly for the rest of 1H 2021.