Polymer prices continue to face the heat of sluggish demand from the packaging sector and ample supply in the domestic market. The lopsided market fundamentals have thus culminated in deteriorating Polymer prices. Polypropylene (PP), High-Density polyethylene (HDPE), and Low-Density Polyethylene (LDPE) prices in Europe have continued their bearish run into September 2022.

Polymer markets globally have been plagued by stagnant to low demand while supply has remained abundant worldwide, and the European market has been no different. The dismal performance of the packaging sector in the last few months has been a direct consequence of sluggish economic activities in the continent and soft consumer sentiment.

Polypropylene prices in Europe have dropped by more than 15% in the last two months on an FD basis.

Similarly, as of 1st week of September 2022, High-Density polyethylene (HDPE) and Low-Density Polyethylene (LDPE) prices have declined by close to 15% in the last two months and settled at Euro 1510 per MT (USD 1498 per MT) and Euro 1475 per MT (USD 1460 per MT), respectively

LyondellBasell, a major manufacturer of all three polymers, has introduced an energy surcharge to be levied on all sales of these polymers in the European region. The company has backed the introduction of an energy surcharge by stating a surge in energy prices, thereby climbing overall production costs.

The customer letter released by the company quoted, “Triggered by the Ukraine war and the boycott of Russian gas, in the past months, we have seen a further and very significant increase in the costs of natural gas, electricity, and freight in all countries in Europe. We consider this Energy Surcharge to be fair, given that the increased production costs for our manufacturing facilities are still considerably higher than the proposed surcharge. Therefore, LyondellBasell will continue to bear most of the increased production costs.”.

The company has announced Euro 160/MT to be levied on all product sales based on the average German month-ahead forward power price and summed up to Euro 160/MT for September 2022. LyondellBasell also stated that the surcharge would vary according to the electricity prices in Germany.

Therefore, it has been expected that polymer prices will likely strengthen in the coming months as the energy surcharge will come into effect. And, if conventions are to be believed, then in the coming months, European demand for power will increase, culminating in greater power prices given the constrained supply of energy in the region.