Polymer Price Know-How: February 2024
In Platribution’s February Price Know-how update, read about how disruptions from the Houthi terrorist activities in the Red Sea are impacting European polymer supply chains, notably for PE and PP imports via the Suez Canal. European engineering and specialty polymer stock levels remain robust, mitigating immediate shipping delay impacts. Logistic challenges and production force majeures are tightening material availability, forcing European converters into delicate procurement strategies to avoid inflated costs amidst rising polyolefin prices.
As previously outlined in Price Know-how, polymer pricing has had a range of implications resulting from the Houthi terrorist attacks on shipping in the Red Sea. The most significant impact has been where local European inventories are low compared to demand, and the lead time is most significantly impacted. In practical terms, this affects PE and PP, where significant volumes consumed in the European region are produced in the Middle East or the Far East. Typically, material moves through the shorter Suez Canal shipping route.
As with Crude Oil, there is the perception that local European stocks of engineering and speciality polymers are sufficient to cover the effects of shipment delays. Therefore, upward price pressure is less acute. That said, the shipping delays are now not the only issue, with bunker fuel shortages resulting in some ships returning to the port of origin and others missing port stops entirely to avoid congestion and/or to save the fuel needed to take the longer Cape of Good Hope shipping route to European port destinations. This additional burden on logistics will likely result in further tightening of product availability, probably affecting a broader range of materials.
Another factor affecting availability is a series of force majeures impacting local European polymer production. It is interesting to note that suppliers of material from the Middle East are bullish about passing through the increased cost of shipping to European converters, commonly stating that if ‘netbacks’ are better from other regions, they will divert material from Europe to these more lucrative markets.
Any shortage of supply in Europe still appears to be transitory, as other regions of the world continue to look well supplied, which leaves polymer converters facing a dilemma in their purchasing strategies to cover requirements whilst at the same time mitigating the risk of ending up with over-priced inventory.
The peak in the Drewry World Container Index for eight major east-west trades is welcome and makes good sense regarding the Red Sea situation being a smaller-scale issue than the shipping challenges created by the global COVID-19 pandemic.
The increase in C2 and C3 contract prices for February is insignificant compared to the respective changes in PE and PP prices that have taken place in January and February and is a clear demonstration that supply/demand balance can independently affect each step in the polymer production process from Crude Oil (Energy), monomers and intermediates, through to polymers.
Benzene and SM tend to be volatile, and given that a greater portion of these products are shipped around the world, it is likely that the Red Sea situation is impacting prices.
Exchange Rates
€- 1.16
$- 1.27
€/$- 1.09
Polyolefins
Polyolefin prices have risen strongly in February as the market saw a sudden shift in sentiment as the Red Sea shipping disruption impacted availability. Monomers saw modest increases of €5 / MT for C2 and Ethylene and €15 / MT for C3 Propylene, but these are largely irrelevant this month save for those in monomer linked contracts. All PE and PP grades saw significant increases of at least €150 / MT with some grades (LDPE) increasing by €200-250 / MT as demand significantly outstripped the immediate availability.
Buyers who had become used to readily available materials found themselves scrabbling for supply and the prices reflected this as producers and traders saw an opportunity to restore the margins lost towards the end of 2023.
These levels will likely be relatively short-lived as we are still in a global oversupply situation. Depending on who you ask, we will likely see a return to January levels sometime between March and May as supply chains adapt and availability matches.
Styrenics
Large Hike for Contract Styrene, Polymer prices Follow and Shipping Issues add to the Increase.
Styrene Monomer has risen, settling at €1555/T, an increase of €190/T from January.
For February, EU GPPS and HIPS followed, with EU ABS showing similar rises. Deep sea materials are showing an increase, as costs generated by the Red Sea issues can no longer be absorbed by producers. This is expected to have an effect for the first half of 2024
GPPS/HIPS/ABS supply chains are still running very low. Polymer producers have been running output at a minimum due to poor demand, and converters and distributors are running inventory at very low levels due to financial pressures. Therefore, any adjustments in polymer prices are likely to be passed on immediately.
Engineering Polymers
The Red Sea crisis continues to impact transit times, shipments from Asia are now exceeding three months lead-time into the UK. Prices are rising for most engineering materials due to increased fuel costs as vessels are directed away from the area around the Cape of Good Hope.
Sustainable Polymers
Most recycled materials have seen increases in February due to some very strong increases in Prime prices. Whilst +€150 / MT is out of the question, increases of €30-80 / MT have been reported as buyers unable to secure prime stocks looked for alternatives.
Recycled LDPE / LLDPE
Recycled LDPE / LLDPE has seen strong increases in February as Prime grades rose to levels not seen since the start of 2023. Good quality recycled material has become an option for those struggling to secure prime LDPE.
Recycled HDPE
Recycled HDPE also saw increases, though perhaps not as strongly as LDPE/LLDPE. Colourable, higher-quality grades suitable for blow moulding of personal care packaging saw stronger increases compared to black grades.
Recycled PP
Recycled PP rose by around €50 / MT as buyers looked for alternatives to either increasingly expensive or simply not available prime grades. Colourable grades were perhaps above this, with black compounds possibly below.
Price Know-How: February 2024 Full Report
Visit the Price Know-How website to read the February 2024 update, which details each market segment and material group produced by Plastribution’s expert product managers.
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Price Know-How, a decade-long trusted resource in the industry, provides essential updates on polymer pricing and market dynamics. This report is crafted by Plastribution, a leading polymer distributor, in collaboration with Plastics Information Europe.
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