Hamburg, Germany: The price of Polyolefin Elastomer (POE) has been falling consistently since the third week of May. The value fluctuated between a percentage change of -0.5% to -4% within the last six weeks. Though the downstream demand from the automotive industry was strong enough to pull up the POE prices, the combined effect of several other factors has been pushing down the prices altogether. One of those factors was weaker demand from the construction and electronics industries. Amidst deteriorating market sentiments and abundant stock availability, the consumption of POE has reduced in the construction and electronics industries. As per market experts, on the one hand, where the increased inquiry for electric vehicles has been surging the consumption of POE in the automotive industry. On the other, poor market performance of the construction and electronics industries has been causing lesser procurements of POE.

The upstream side of the elastomers industry is even more chaotic than the downstream side. The prices of Ethylene, a feedstock of POE and mostly used in manufacturing various other synthetic rubbers, have been falling steadily in recent weeks in the European market. Demand for Ethylene has fallen for several weeks, and producers have cut production accordingly. However, in spite of the production cuts, there are large Ethylene inventories in the European market. Hence, the Market momentum of Ethylene has become very limited, given the low demand and low production rates. The market value of Ethylene has either been plunging or stable since the first week of May, though the effect of declining feedstock prices or reducing manufacturing costs took some time and projected itself on the POE market from the third week of May.

If we assess the value chain of POE more closely, we will find the depleting market sentiments of Naphtha a few weeks back. Though the Naphtha market has stabilized, its market value slumped drastically in May. In fact, during the second week of May, the price of Naphtha dropped by almost 10%, and it kept depleting till the first week of June. The price of Naphtha kept plunging on the back of lower demand from the petrochemical industry and its oversupply in the market, squeezing the profit margins of the manufacturers and suppliers. Altogether, weaker demand from the construction and electronics industry and depleting upstream costs caused the price fall in POE.

As per ChemAnalyst's anticipations, "The price of POE is most likely to normalize in the upcoming weeks as Naphtha prices have recovered, which would encourage the improvement in the Ethylene market. In fact, during the week ending on June 2023, POE prices declined only by 0.6%, indicating that the deterioration in the value of POE has slowed down."