Polymer prices - Rising geopolitical uncertainty and weak demand
On Friday, the news of the war between Israel and Iran triggered a slight pick-up in buying activity. Which is expected to intensify further in the week ahead as the war escalates. Non-integrated polymer producers are already considering lower polymer price increases due to the rise in feedstock prices.
While it is common talk in the market that polymer prices have bottomed out, amid ample supply and selling pressure, many converters expected further price cuts at relatively low inventory levels. The reason for this is not so much speculation, but rather weak demand. According to converters, it is already worth buying at a very low price level, but these polymer stocks will last longer due to weak demand.
For the time being, it is questionable whether the rapid change in circumstances, with oil prices steep and NAPHTHA prices moderate for the time being, will stimulate demand in the week ahead? Or, plastic converters, who have been trained by changes previously thought unlikely in recent months and years, are calmly accepting the new war crisis and the market uncertainty it causes. Because European manufacturers generally have availability, and feedstock prices have not jumped out of the range considered normal. Thus, a strong recovery in demand in the polymer markets is not yet expected in the second week of June, even if prices start to rise. Plastic converters are reluctant to build up stocks for the summer because of economic uncertainty. However, if the war in the Middle East escalates further, it could bring about changes in oil prices and the availability of imports. This can lead to price increases, the extent of which is severely constrained by demand.
However, due to changing circumstances, polymer manufacturers, even if they do not raise prices, will reduce their price flexibility and will stick to their list prices published at the beginning of June. This is in line with the aspirations of plastics converters, who are happy with cheap prices but do not want them to fall further. Because further price reductions would encourage their customers to renegotiate finished product prices. Raising the prices of finished products would be very difficult in the event of a renewed rise in polymer prices.
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myCEPPI
myCEPPI provides a weekly price report for commodity plastics.
