Although strong March hikes passed on initial PP deals, European players have noticed a patchy demand. Cost pressure has been the key driver of the bullish run, considering weak market dynamics for PP.
Some suppliers stopped all new orders or elected to issue further hikes on top of initial announcement levels in a bid to reflect soaring energy costs. This approach faced a lukewarm response from buyers in certain sectors as prices were already regarded too high to work and they, being cautious towards high-cost materials, limited their purchases to their urgent needs.
Meanwhile, others reported an increase in price inquiries as well as purchasing activity amid efforts to purchase as a hedge against future hikes. They also think that PP prices may witness further hikes as the month proceeds.
PE performs slightly better than PP
PP demand has lagged behind PE so far, although purchasing activities have been rather cautious in polyolefin markets amid widespread uncertainties. Converters in the automotive and white good sectors have witnessed a slowdown in their order entries amid global microchip shortage and declining consumption compared to 2021, when pent-up demand led to a surge in these segments.
Inflationary pressures resulting from surging transportation and utility costs will undoubtedly have a knock-on effect on consumption of durable goods, while demand for packaging applications-which are made from PE in particular- is expected to remain resilient.
Moreover, PPH availability is still ample as opposed to PE, which was more profoundly affected by lower import availability following delivery delays from the US.
Players brace for further hikes
Meanwhile, the outlook for both remains firm despite increased volatility in the upstream markets. Prices could rise even higher should disruptions worsen or continue for a longer period. Producers-determined to avoid margin losses- will issue further hikes regardless of the state of demand.
According to ChemOrbis Price Wizard, spot naphtha prices on CIF NWE basis stand at their highest levels since 2008. Spot propylene and ethylene prices reached unprecedented levels of around €1400/ton and €1380/ton on FD NWE basis, respectively.