European POE Prices Plunge in November Amid Falling Ethylene Costs

Spain, Europe: Throughout November, the European market witnessed a predominantly stable or declining trend in the pricing of Polyolefin Elastomer (POE). This market behavior was primarily attributed to the downward trajectory of Ethylene costs, a key feedstock in the production of POE. Ethylene prices experienced a marginal decline in the European market, maintaining an equilibrium between demand and supply in the domestic sphere.

The reduction in Ethylene costs stemmed from the considerable drop in global crude oil prices, impacting Naphtha prices negatively. The subdued demand from the terminal market further contributed to the decreased cost support for Ethylene. Consequently, this downward trend exerted pressure on the pricing dynamics of POE. The downstream Polyethylene industry, a significant consumer of Ethylene, remained inactive due to sluggish consumption within the plastic and packaging sectors. High inflationary pressures compounded the situation, resulting in a tepid demand for Ethylene and subsequently affecting the demand for POE.

Simultaneously, the European automotive sector faced challenges, with weakening profits owing to a slowdown in Electric Vehicle (EV) sales. While overall auto sales showed resilience, the fundamental profit landscape deteriorated rapidly. Major players like Volkswagen and Mercedes experienced intensified pressure, although BMW managed to withstand some of these stresses. Data from the European Automotive Manufacturers Association revealed a superficially robust performance, as October 2023 witnessed a 14.6% increase in EU car sales. However, Germany, the largest market, only saw a 4.9% rise compared to the previous year, signaling underlying weaknesses.

Despite the apparent success in repairing supply chain disruptions and flooding the market with new car models, the consequent price reduction is expected to dent industry profit margins soon. Western Europe, encompassing major markets like Germany, France, Britain, Italy, and Spain, continues to grapple with inflation and high financing costs, further complicating the automotive industry's profitability and impacting the POE market.

As November draws to a close, the European market remains cautious, closely monitoring the fluctuating costs of Ethylene and the evolving dynamics within the automotive sector. The impact of these factors on the pricing and demand for POE is anticipated to continue, subject to the trajectory of feedstock costs and the automotive industry's performance in the coming months.

As per ChemAnalyst's anticipation, "The price of POE would fall further in December on the back of the upcoming destocking season, during which POE manufacturers and traders would more likely be focused upon clearing off their inventories even if they must squeeze their profit margins. However, stability in POE price can be expected in January 2024."