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EU CONSUMER CONFIDENCE REACHES RECORD LOW

EU consumer confidence reaches the lowest ever recorded level in July, according to the latest data from the European Commission.

The new numbers show a decrease of 3 percentage points for the EU and 3.2 percentage points for the Euro Area.

The new levels surpass the lowest point reached during the beginning of the pandemic, raising fears of a major economic contraction.

The polymer industry has been feeling a considerable pressure on demand which is to do with a multitude of reasons.

But this latest reading reinforces the view that consumer jitters over inflation, war, and a looming energy crisis are additional major factors slowing down demand for polymers.

PA66 GF PRICES DECREASED SUBSTANTIALLY IN JULY
car engine

PA66 GF prices decreased substantially in July versus June in Europe due to better supply and decreasing demand.

As costs have continued to climb, producers sacrificed margins to maintain sales.

During the past year, PA66 prices surged after supply shortages and then energy cost increases.

Faced with good demand, producers were able to increase prices and also margins.

But lately the trend has changed to the downside.

The reduction in production disruptions has improved supply. And with the lower demand, inventories have apparently increased.

The current weakness resulted in some accounts seeing triple digit decreases in July.

Meanwhile, some buyers could only manage rollovers in July. While these were few, there was no indication of price increases at any account.

What is more, the current trend is likely being driven also by the surge in energy costs eroding Europe’s competitiveness, on polymers and finished goods.

July is a slow seasonal month when companies shut down for the summer. However, the current slowdown are do to with more than just seasonal trends.

The doward momentum will probably continue in August and possibly after the summer.

Nonetheless, the war, the slowdown in China, and inflationary pressures, make any forecast highly uncertain.

While the range of possibilities remain wide, the PA66 market in Europe during the past two months has become weak, a trend that could continue for the rest of the year.

POLYMER MARKETS CONTINUED TO WEAKEN IN JULY
falling trend

Polymer markets continued to weaken substantially in July in Europe on the back of falling demand.

This was making price negotiations difficult as many producers continued to face increasing costs.

Demand for most polymers has been getting weaker since the beginning of the second quarter.

Activity has remained soft in automotive but has recently started to fall in other markets. Some of these include appliances and even construction.

The decrease in demand is attributed to many factors. Some of these include supply chain disruptions, seasonality, and high raw material prices. But most probably also inflationary pressures.

This weakness will most probably continue for the rest of the summer, and likely for the rest of the year.

In some markets, the fall in demand has been rather drastic, resulting in players having to stop production lines.

Polypropylene (PP) and Acrylonitrile Butadiene Styrene (ABS) are some of the worst-hit markets, also because of competitive imports.

With the relentless increases in energy prices, Europe continues to lose competitiveness across entire supply chains, which is probably weakening demand further.

Meanwhile, during this time of the year activity slows down because of the summer, and this has certainly accentuated the fall in demand in some sectors.

There were markets that were still performing relatively well, such as electrical and electronics and packaging. However, this was not enough to offset the losses in other markets.

As demand continues to weaken amid rising inflation, the situation could become much worse for all players during the winter when there is a greater risk of a spike in energy costs.

DEMAND IS DECREASING SUBSTANTIALLY IN EUROPE
Decrease graph

Demand is decreasing substantially in Europe in June across most polymer markets amid a multitude of pressures. With energy prices remaining firm, producers’ margins could suffer a major squeeze.

Prices have continued to go up after the onset of war. But the slowdown in demand because of inflationary pressures and competitive imports from regions with lower energy costs are causing a dramatic fall in demand in Europe.

Moreover, buyers are struggling to pass on the continuous increases in costs amid supply chain disruptions.

In this market environment, buyers are destocking, probably also those volumes accumulated becasuse of panic after the war started.

An element of seasonal slowdown ahead of the summer is probably also adding downward pressure on demand.

The decreases in demand are quite substantial, up to 40% in the case of acrylonitrile butadiene styrene (ABS). However, other markets are also slowing down, such as polypropylene (PP), polystyrene (PS), nylon (PA6/PA66), and polycarbonate (PC).

There are downstream markets that are still holding up well, such as electrical and electronics and construciton. But players in these markets are also beginning to experience signs of weakness.

While it is too early to see this as the start of a a major trend, prices could continue to soften during the summer months.

And as energy costs remain firm and threaten to spike again, prices will most probably fail to fall back towards their long term trend. But for now sharp downward corrections appear to be unavoidable in June.

PA BUYERS FAIL TO PUSH PRICES DOWN IN MAY
plastic resins granules

PA buyers fail to push prices down in May and had to instead settle for a rollover from April.

Buyers saw yet another surge in prices in April, this time because of the higher energy costs.

Most accounts from March to April settled at an incraese of €400-500/mt for both PA6 and PA66.

Since then, energy prices, decreased, particularly gas prices which have had a big impact on electricity costs.

Gas futures have fallen from the peak of around €230/MWh in March to around €90/MWh, while crude oil from $124/bbl to $113/bbl.

However, sellers succeeded in rolling over prices in May, helped mainly by persistent frim raw material costs.

Benzene for example posted double digits increases from April to May, which appears to have been enough to support sellers.

A degree of resilince of demand also helped to prevent buyers from securing decreases in May.

Nevertheless, the outlook was getting weaker for the summer months.

A combination of seasonal retreat in costs amid lower demand because of inflationary pressures should be enough to support decreases.

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