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PP PRICES POSTED LOSSES IN JANUARY
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PP prices posted losses from December to January in Europe, according to the GC Intelligence monthly assessments.

Better market conditions allowed prices to fall for the second consecutive month from the highs reached last year.

The polypropylene homopolymer spot price dropped €40/mt in January. However, prices remain at levels considerably higher than they were before the pandemic.

As with most polymers, despite improvements, a strong demand, high costs, and logistic disruptions remain headwinds against a big downward correction.

PP PRICES REMAIN FIRM IN EUROPE

PP prices remain firm in Europe in December, according to GC Intelligence market analysis. A combination of factors are preventing a retreat from the current highs despite better supply.

Polypropylene (PP) supply in Europe remains tight. But the situation has improved from the critical shortages experienced earlier in the year. However, prices are not falling, remaining supported by logistic disruptions, firm costs or raw materials, and lately high electricity costs.

Another key factor preventing prices from retreating is the high freight costs making imports less competitive. And the lower value of the EURO has eroded further this competitiveness.

The lack of competitive imports and other supporting factors will ensure European prices will remain at current levels. Nevertheless, as events accumulate and continue to change market dynamics, prices have diverged considerably between players.

While some buyers note spot prices for homopolymer grade below €1,600/mt, others are still above €1,800/mt. And for contracts, while some sellers are pushing for prices €450/mt above the monomer propylene prices, others are looking for as much as €600/mt.

For many buyers this unusually places contracts above spot prices. As such, many are contemplating to move away from contracts and purchase exclusively on spot. While such a move calls into question security of supply, events during the past year proved that contracts do not necessarily guarantee supply.

Meanwhile, given the many variables, the outlook remains less predicable for next year. However, it is more likely than not that a prolonged pandemic will continue to disrupts markets and prevent prices from falling substantially from the current highs in the next few months.

PP PRICES HAVE FOUND RENEWED SUPPORT
Colourful plastic granules

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.

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