The European Propylene market, particularly in Germany, experienced a significant price increase in August 2024. Despite a reduced demand due to economic uncertainties, this surge was primarily driven by supply shortages and logistical challenges. The limited availability of imports further exacerbated the situation, allowing domestic suppliers to exercise pricing power.

While a decline in crude oil prices typically leads to lower feedstock costs and, consequently, lower manufacturing costs, the European Propylene market exhibited a contrasting trend. The key factor behind this was a significant reduction in Propylene supply. Several petrochemical plants in Europe faced operational challenges, including maintenance shutdowns and logistical issues. BASF SE in Ludwigshafen, Germany having a capacity of 29167 MT/yr, and Shell Moerdijk in Moerdijk, Netherlands having a capacity of 42500 MT/yr exerted a force majeure in their Propylene Plant from 1st August 2024 to 13th August 2024. These disruptions limited the availability of Propylene, driving up prices to settle at USD 1057/MT, Propylene FD Hamburg, Germany during the week ending August 2024. With the limited availability from domestic sources, buyers were forced to turn to the import market. However, imports were also hampered by several challenges. Freight costs from the USA to Europe had increased significantly, making imports less economically attractive. Additionally, lead times for imported Propylene had lengthened, further discouraging buyers. As a result, the import market remained relatively barren. The shortage of imported Propylene allowed domestic suppliers to raise prices. With limited competition from imports, domestic producers could command higher prices for their products. While this did not immediately lead to increased buying activity among converters, other market participants, anticipating future shortages due to planned maintenance, began to replenish their stocks.

Demand for Propylene, however, remained relatively subdued. A variety of factors contributed to this tepid demand. Economic uncertainties, including concerns about a global recession, led to cautious buying behavior across various industries that consume Propylene derivatives. These industries, ranging from food packaging to automotive and construction, reduced their purchases, limiting the overall demand for Propylene. The summer holiday season in Europe further exacerbated the decline in demand. Traditionally, market activity slows down during this period as industry participants take a break. This year, the summer lull was particularly pronounced, as buyers were less inclined to replenish their stocks which certainly reduced the demand. As per ChemAnalyst, the Propylene prices in Germany are expected to decline in September 2024 on the back of a seasonal slowdown.