European Polypropylene Prices Surge at the Start of September 2024

As September 2024 began, the European polypropylene (PP) market experienced a modest increase of approximately 0.8%, driven by restricted imports from the Middle East and North America, along with recent plant closures. Many companies in the PP industry are now reassessing their refineries and assets across Europe. The low supply of PP is evident from the 2% price increase observed in August 2024, with expectations of further hikes in September. Demand for PP across Europe remained moderate, with minimal activity in the downstream construction, automotive, and textile sectors, leading to subdued trading. The European petrochemicals industry faces significant challenges, including market pressures, cost constraints, and evolving regulations. In response, producers are conducting strategic reviews to protect their margins and ensure profitability. For example, LyondellBasell, which began a strategic review of its European assets in early May, recently detailed its short-term goals. Similarly, ExxonMobil and Sabic have announced the closure of some of their assets.

LyondellBasell’s review, announced on May 9, 2024, includes its Olefins & Polyolefins (O&P) and Intermediates & Derivatives (I&D) business units. In early August, the company disclosed details about the European assets under review, which include the Berre plant in France with PP and propylene facilities, the Muench muenster plant in Germany with a cracker and propylene production, and the Brindisi plant in Italy, where a PP plant was permanently closed earlier in the year, with a second plant also under review. Additionally, the Tarragona plant in Spain houses two PP plants, and the Carrington plant in the UK has a PP plant. These reviews and closures are expected to further tighten the PP supply in Europe.

The market continues to face several bottlenecks, with some plants undergoing maintenance and others experiencing force majeure, contributing to higher spot prices. For instance, LyondellBasell's propylene manufacturing facility having a capacity of 33333 MT/year in Wessling, Germany, is under maintenance for the entire month of September 2024. Similarly, Braskem's PP facility in Schkopau, Germany, with a capacity of 350,000 MT/year, suffered significant mechanical damage to its PP melt pump on August 28, 2024. Although repairs are underway, the facility was initially slated for maintenance from August 9 to August 21, exacerbating supply issues. Furthermore, INEOS Olefins and Polymers was also recorded to facility having a PP capacity of 23750 MT/ year at Grangemouth, UK under maintenance turnaround during entire September 2024, further clipping supplies.

Current demand for PP in Europe is primarily driven by inventory restocking amidst low availability. European suppliers are increasingly relying on domestic production as imports from the Middle East are delayed due to worsening conditions in the Red Sea. Additionally, low imports from the US market are a result of difficulties in restarting propylene (polymer grade) plants following maintenance turnarounds. Dow and Enterprise have struggled to maintain on-spec polymer-grade propylene (PGP) from their PDH units, leading to elevated PGP costs, which have risen by 5.4%. The constrained supply of propylene is further compounded by force majeures at Chevron Phillips Chemical Company's production sites in Port Arthur and Old Ocean, which have capacities of 28,889 MT/year and 32,917 MT/year, respectively.