PP demand in Europe plunges on reduced demand from several sectors, particularly automotive

20-Oct-08

A collapse in end user demand in sectors such as automotive, construction, textile, rigid food and beverage packaging, triggered by the recent global economic downturn has affected polypropylene demand in Europe. This has forced sellers and producers to slash spot polypropylene prices by up to €165/MT over September and October for homo injection grade. As per a report by the European Automobile Manufacturers' Association (ACEA), Markets in Western Europe registered 1,211,378 new cars in September- denoting a fall of 9.3% as compared to the same month last year. Demand for new cars is weakening because of deteriorating economic conditions as large expenditures and financing for such purchases are being deferred. Several grades of polypropylene are widely used in the automotive industry for applications such as interior and exterior trims and parts, instrument panels, bumpers, electrical housing, and engine parts. Among all other deteriorating applications, the automotive segment has suffered much bigger consequences than others, as the downturn in the global car industry is more far reaching than expected. The on going global financial crisis will continue to affect demand for all products, affecting a further slip in prices, and reduced run rates at all producers. Certain factors, however, could lessen the impact of reduced PP from the automotive sector : The newly designed, smaller passenger vehicles that are being gradually more favored for their lower fuel consumption and CO2 emissions, have a higher amount of polypropylene applications in the interior than larger forerunners. Also, new car sales continue on an upward trend in the long term, due to a larger number of first-time car buyers and a relatively higher economic growth rate.