Frankfurt (Germany): In September, the prolonged summer holidays in the European region ended. The overall economic and commercial activities observe significant improvements in the domestic market. At the same time, numerous market participants were eyeing the upcoming developments across the value chain. Throughout the Holidays, the market remained muted, especially in the polymers sector, including monomer and Polymer, e.g., Propylene and Polypropylene. Although market experts were anticipating that situation will improve in the recent term.

The past few months were dull amidst inadequate demand in the downstream Polypropylene market. It significantly levied the impact across the Propylene and its derivatives value chain. The European market participants preferred contract volumes, besides avoiding the spot market, as the activities were subdued, and demand remained suppressed amidst the holidays. Although, several market experts stated that inquiries would soar as the cost of living in the region will be impacted due to the rising inflation in the area coupled with the devaluation of the Euro against the USD.

Numerous uncertainties will cloud the market sentiment along with the rebound in demand across the value chain. The improved demand was likely to limit the economic recovery. At the start of the month, the supply outlook possibly maintains a bullish trend due to the destocking of inventories with minimal negotiations. Whereas by the end of the month market outlook will likely become pessimistic, impacted by the deliveries of downstream P.P. contracts due to concerns regarding energy security.         

In addition, the impact of the high energy prices across Europe has further pressured the overall scenario as it weighed over the operational loads at the manufacturing facilities. Last month, Crude Oil settled at USD 92.36 per barrel, up by +USD 7.67 per barrel. At the same time, the average prices dropped on a month-on-month basis compared to July. According to the data released by the U.S. Energy Information Administration, estimated Brent Crude Oil averages USD 98 per barrel for the fourth quarter. Therefore, several analyses showcased that Polymer production costs will likely shoot up in double digits.

The main concern is gas availability after the Russian authorities shut off the supply across the Nord Stream-I pipeline, citing maintenance. The inflow of gas and stocking activities halt, which traditionally increases in the third quarter. Even though the E.U. releases their gas reserves, the availability remains inadequate to cope with the demand during the peak heating season.

Overall, PMI for Europe has dropped below 50, indicating a significant contraction in the manufacturing activities in the region, which is further coupled with the gas shortage. It is very much possible that the market participants or consumers will witness gas rationing across Europe. The current focus of market players is on the Asian markets, but as the prices stabilize, the competition will likely shift to the European markets. The availability of several products in the Propylene value chain will remain uncertain against the concern regarding the operating loads providing a sufficient window for overseas suppliers to compete in the European region.