For over a month, PP and PE markets have been falling in Asia amid persistently sluggish demand and plunging feedstock costs. As per Chemorbis, rising concerns regarding the health of the global economy following the debt crisis in Europe has weighed down buyers’ sentiment pushing them away from the market and forcing sellers to destock. According to ChemOrbis Price Indexes, China’s import homo PP market has lost US$130-140/ton in a month’s time, with a large portion of the decreases having occurred in the past two weeks. Sharper decreases have materialized in the PE market ranging of US$120-170/ton within the same period. In Southeast Asia, import PP prices have retreated by US$100-120/ton since early May while decreases as large as US$200/ton have occurred in the PE market, particularly at the low end of the range.
In the Mediterranean markets, Turkey’s import PP market has lost ground by US$80-90/ton since early May while the import PE market has posted approximate falls ranging from US$60-$90/ton in a month. In the Egyptian market, the decreases seen are relatively limited with PP losing $50/ton and PE registering average falls of $30-50/ton since the first week of May. Regardless of this clear downward trend in global markets for the past four weeks, the European PP and PE markets have been sustaining their upward momentum. In May, increases of €30-50/ton passed for PP, LDPE and LLDPE. Following six months of successive increases, sellers are now seeking similar sized hikes for June. The main justification cited by sellers is the ongoing tightness in the European PP and PE markets. The upstream monomer contract markets have also remained firm for June despite the plunging crude oil and naphtha markets for most of May. Propylene rolled over from May and ethylene rose by €10/ton, lending extra support to sellers. Lack of competition from imports is also helping them raise prices comfortably since the decline of the euro against the dollar has almost closed the door to imports. Nevertheless, buyers are complaining about the relentless hikes they have been conceding to. Even though there has been no major improvement in their end product businesses and feedstock costs are stable to only slightly higher, they will be exposed to higher prices for the seven month in a row. Admitting that overall supplies for PP, LDPE and LLDPE are tight, they argue that these hike targets will have to be trimmed down. Indeed, several players have already expressed concerns that prices in the PP and LDPE markets are inflated as the continuous price hikes have been spurred by tight supplies rather than real demand dynamics and this may bring a downturn as soon as there is relief in availability. Buyers were expecting this downturn to occur in June; however, these expectations appear to have been delayed since supply issues are still dominating the market with continuing allocation restrictions and force majeure announcements throughout Europe, according to players in the country. Import cargoes are also failing to find their way to the region and relieve this tightness since the local market is protected against imports by the four year low in the euro/USD parity. Apart from the local market dynamics, the downturn in global markets as well as the emergence of European cargoes in the neighboring Turkish market at relatively lower levels both for homo PP and LDPE are generating question marks regarding the sustainability of this uptick over the medium term. While the Turkish market should be watched to measure the degree of real tightness in Europe, the outlook for these markets remain firm for the short term.