Polymer prices – successful April price increases, weak Easter demand
The extremely rapid rise in polymer prices in a month has made it difficult for converters to finance and pass on to their customers, and this will translate into reduced demand in the market in April after the panic buying in March.
Demand tends to drop even in "normal" years due to the Easter holidays and school holidays. This is what happened now. This is the reason why polymer producers have mostly not yet met their monthly sales targets. Despite this, there is no apparent intention to reduce prices, and in fact, European polymer manufacturers have announced further price increases. Due to problems in the supply of feedstock and auxiliary materials, the two large petrochemical groups in Central Europe have declared force majeure. In addition to the uncertainty of crude oil supply, the limited supply of additives and auxiliary materials used in polymer granulation also appeared as a factor reducing supply. The reason is that high prices have made European polymer production profitable again, so many European polymer producers have fully increased their capacities and need more additives and excipients. Meanwhile, in parallel with the decline in European polymer production over the past 2 years, polymerization additive and auxiliary material production capacities in Europe have been reduced. As a result, they are unable to meet the increased demands. (The situation is eerily similar to the supply situation in the post-COVID year). On the supply side, high prices in Europe have led to import offers for polyethylene from Egypt, polypropylene from South Korea and PET from Vietnam. However, the arrival of shipments is expected at the end of May for North African grades, and at the end of June or beginning of July for Far Eastern grades. The recommended import prices are close to the lower end of the current price bands. All this means that a significant price decrease is not expected in the summer either, but rather smaller price corrections are likely at the upper value of the price bands, i.e. a narrowing of the price bands is likely. Due to incoming imports and weak demand for finished products, further price increases are unlikely. Prices are likely to stabilize at a high level. The usual weak summer demand and increasing imports of polymers may bring a slow price decline in the third quarter. For now, the price declines are being counteracted by the fact that the price of petrochemical feedstock, NAPHTHA, is still high, and its full price increase was not even reflected in April's contracted monomer prices. Thus, a monomer price decrease is unlikely in May for now. A decrease in the price of NAPHTHA would require more incoming crude oil and increasing refinery capacity utilization. For now, Europe is a prisoner of the Strait of Hormuz, with few alternative sources. Meanwhile, Asian countries, recognizing the realities, have begun to buy more from the United States and are also buying from Russia again.
The normalization of European crude oil supply could bring a solution and a price reduction for both feedstock, monomers and polymers. Until then, polymer prices will be driven by the changing collective mental state of the market, alternating between hope and despair.
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