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PP PRICES HAVE FOUND RENEWED SUPPORT
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LONDON (GC Intelligence) – Polypropylene (PP) prices have found renewed support in November. This is despite some improvements in availability.


While it is still early in the month, some sellers made clear that they want to increase prices from the already high levels. And the proposed increases are in line with the increase in the monomer price.

The monomer propylene contract in November has apparently increased €95/mt from October. And some of the proposed increases for PP in Europe have so far been around this level.

Some of the early offers for PP in November were proposed with an increase of €100/mt. And given that the starting point on these accounts was already high, it is possible that offers could see even higher increases for other customers.

An increase above the the monomer price movement will not be surprising during current market conditions.

Most polymer producers absorbed high costs of energy. And they are now trying to price in some of these increases. In fact, one PP producer in October apparently proposed a surcharge of €50/mt.

The increases above the monomer increase will find resistance, however, especially because prices reached levels relatively high compared to pre-pandemic levels. In addition, availability has increased from the critical shortages seen in the spring.

However, the European PP market at best moved from tight to finely balanced and lead times remain long owing to prolonged logistic issues. Therefore, some accounts could well receive increases higher than the increase in the raw material propylene in November.

Polypropylene supply remains tight in October in Europe as buyers are still struggling to fulfil their requirements.

This tightness in PP stems from low imports, plant issues, and good demand.

The short supply means buyers cannot negotiate lower prices from the current highs.

Supply was tighter earlier in the spring. And while the market has seen some improvement since then, this has been marginal.

Given the multitude of factors that are keeping supply short, most likely it will take months for balance to be restored.

The PP market is not the only polymer market in Europe that is tight.

Many other polymers are experiencing shortages due to plant issues, low imports, and strong demand.

For example, ABS, PS, and PC are some of the markets that are suffering from the ongoing turmoil which is largely to do with distortions created by the pandemic.

While a slowdown in demand due to lack of raw materials, such as in automotive, eased the stress in supply of many polymers, for now this has not been enough.

EU CAR SALES JUMP STEEPLY IN MARCH

EU car sales jump steeply in March, registering an increase of 87.3% compared to March 2020, according to the latest data from European Automobile Manufacturers’ Association (ACEA).

While the figures represent a recovery from the slump suffered in March 2020, at the start of the pandemic, they are also consistent with current market feedback of an extremely buoyant demand for polymers from the auto sector.

Car registration figures

Indeed, many market participants for months described the automotive sector demand as extremely healthy, a trend that has continued unabated since Q4, despite some slowdown caused by semiconductors shortages.

Moreover, the slowdowns in automotive production triggered by shortages of raw materials imply an increase in activity later in the year as the sector attempts to catch up with the current loss in production.

In fact, since the beginning of the year, some polymer producers received letters from companies in the sector highlighting that the current slowdown because of lack of raw materials is temporary, suggesting to prepare for a pickup in production later in the year.

A persistent strong demand from the auto sector will continue to drain the short supply of many polymers, a short supply partly linked to a multitude of disruptions created by the pandemic and likely to continue for the rest of 2021.

After polymer prices climbed to record highs in April and are arguably set to continue to do so in May for some polymers, evidence is building of a slow, rather than a swift return to normality as it is possible that demand will remain high amid tight availability.

With many buyers at breaking point, there is cause for concern that it will take months for availability to improve. At the same time, many polymer buyers may not see prices retreat from the current highs in 2021.

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.

The pandemic is causing significant distortions in both demand and supply.

Polypropylene (PP) prices climb €200-250/mt in February as the scarcity of feedstocks and good demand reduce supply.

Meanwhile, the increases mean spot prices of homopolymer injection moulding reached €1,300-1,400/mt, according to GC Intelligence assessments.

A combination of factors have lead to the current shortage of PP in Europe.

First, several producers reportedly had low availability, either because of turnarounds or unexpected issues.

Second, a plausible explanation is the lack of the feedstock propylene. Propylene is also a by-product of oil refining. With low demand for fuel during the pandemic, production of the key feedstock may have been impacted.

In fact, acrylonitrile (ACN) is also feeling the impact from supply issues of propylene.

Third, the ongoing shipping disruptions have resulted in long lead times and a reduction in PP imports.

And finally, demand across all market segments from packaging, appliances, and automotive remains very strong.

This strong demand can also be linked to the pandemic, since spending on goods has most likely increased as a result of a reduction in consumption of services.

This surge and sustained increase in demand during the second wave of the pandemic has been seen in all polymers.

Therefore, it is plausible to assume that the current environment of good demand, tight supply, and high prices will continue for most of H1 2021.

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