European PP Market Witnesses Bearish Sentiments Midway Through September 2024

Midway into the September 2024, the European Polypropylene (PP) market witnessed a bearish situation with prices depreciating by approximately 1.7% after rising continuously since the middle of July 2024. The rise in the prices of PP across Europe were attributed to several PP production facilities in Europe being put into force majeure or witnessing planned shutdowns, which consequently led to the paucity of the commodity in the market. While this lack of material availability failed to increase buying activity from converters, other players returned to the spot market to restock in anticipation of further supply tightness due to the upcoming propylene producer planned maintenance across the third quarter. Broader appetite from downstream derivative markets remained subdued, as demand from key end-user applications, such as appliances and automotive, showed no signs of recovery from poor conditions throughout the year and economic uncertainties. Demand is still very poor for converters, major applications like automotive are doing very poorly, market participants noted However, during mid-September 2024, some imported cargoes from the Middle East, notable from the Saudi Arabian market and South Korean market were reported to have arrived at the European market eventually resulting an improvement in supplies, and accordingly led to price depreciation.

In terms of supplies market participants noted a 3000 MT PP cargo headed towards Antwerp, Belgium from Saudi Arabia, which is expected to improve supplies later during the month. Other market participants also noted a 3000 MT PP cargo which had arrived from Incheon, South Korea to Rotterdam, Netherlands earlier this week. With support to the European PP market not being present from the downstream key industries, market conditions eventually turned bearish. After the summer break, a significant recovery in ordering activity is not in sight. Many converters are only ordering what they need because they are still sitting on adequate stocks. This was despite the fact some PP production units continuing to remain under FM or having undergone planned maintainance scheduled for entire September 2024. Another reason for the present bearish market condition for PP across Europe was significantly lower costs of Naphtha, which tumbled by 6% during this week eventually resulting eventually cooling production costs of feedstock Propylene across Europe, which subsequently also helped in the European PP market witnessing bearish market situation.

The improvement in supply situation of PP is also evidenced across the Turkish market where demand conditions remain unfavourable. PP operating rates in Turkey were PP run rates remained lower around 50% from the downstream textile industry. Since the Turkish PP market is primarily dependant on supplies from Middle East, suppliers across Saudi Arabia were not willing to get involved in businesses with Turkish traders, because of macroeconomic challenges present in Turkey, during August 2024. However, towards the end of September 2024, some Saudi Arabian suppliers were heard to have been offering a discount of up to USD 20/MT as demand from primary export destinations such as North Africa and India remained subdued due to the present monsoon season. This was further accompanied aby competitive PP offers from Chinese suppliers where expansion of PP capacities resulted in an oversupply situation. In terms of demand, at present demand for PP across the European market across remained sluggish as market insight revealed that, even if producers tried to raise polypropylene prices initially, the negotiations quickly turned towards price reductions with the prime reason being continuous slump in demand, that left producers with virtually no hope of winning an increase. As per expectations, the European PP market is expected to witness a bearish market situation as subdued demand conditions continue to weigh on the pricing situation, with most suppliers having restocked, despite tight production conditions across Europe.