Polymer prices - unexpected monomer price drop makes price increases impossible
Not all Central European producers’ prices are known yet, but in the case of polyolefins, they mostly implemented roll-overs. The same has been attempted for polystyrene, but signs of price decline are already visible.
The monomer price decline is frustrating for converters because both BRENT and NAPHTHA quotations are trending upward. However, there is a logical explanation for the price drop, the calendar effect. August olefin monomer quotes were published at different times; propylene monomer was published on July 31 at a naphtha price of 778.41 USD/t, while the naphtha price on August 31 was 761.83 USD/t. It was slightly lower, so a slight decrease in propylene monomer prices seems logical. However, the price of naphtha has since started to rise, now at 788 USD/t, and is expected to continue to rise. However, the situation is strange in the case of ethylene, the August price announcement was delayed, published on August 5th, the day of a temporary naphtha price low (668 USD/t), while the September contractual ethylene monomer price was set on September 1st with a naphtha closing price of 805.76 USD/t. Derived from the feedstock, it would have been logical to increase the price of ethylene monomer.
However, tensions are building in the olefin and partly styrene value chain, with most polyethylene and polypropylene prices well below the monomer price, and the monomer-polymer spread negative. This should cause significant losses for non-integrated polymer manufacturers. This is also why Western European polymer producers attempted to raise prices despite falling olefin quotation prices. Not with much success. With falling monomer prices, converters see no acceptable reason for price increases. Even though polymer manufacturers claim that there was no real price increase in August despite rising monomer prices, the markets were practically characterized by a roll-over. A polyolefin roll-over is likely in September despite rising feedstock and oil prices. The major task of the fall season will be to "settle" prices in the olefin monomer market, adjusting monomer prices to polymer prices. This would require a significant drop in feedstock prices, which is currently unlikely.
The situation is different in the case of polystyrenes. According to the price announcements that have become known, European manufacturers tried to implement a kind of roll-over in the face of significantly decreasing SM prices, but the market naturally rejected this. Prices will likely return to July levels.
The price situation is not favorable for either polymer manufacturers or converters. The falling monomer prices in September are making converters uncertain; the thinking pattern cannot be overridden, with falling monomer prices, prices can only be raised during periods of exceptional demand. This isn't the right time for that. Most plastics converters will buy less than planned, expecting further price declines, as is customary in the fall. Thus, supply pressure is expected to characterize the markets, further strengthening expectations of price declines.
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