Virgin PE and PP Markets: Understanding the Shifts in Mar-Apr 2024

As we enter April 2024, the dynamics of the virgin Polyethylene (PE) and Polypropylene (PP) markets come under scrutiny. This has happened after a robust start of the year and recent shifts in PE and PP in buyer sentiments. The early part of 2024 witnessed unprecedented strength, supported by panic buying due to the Red Sea logistics issue. However, as the market settles and absorbs the implications of the logistical challenges, attention turns to the outlook for April. Find out the nuances shaping the virgin PE and PP markets for the month ahead along with, an analysis of key drivers, notable trends, and anticipated changes from March.

Overview of March PP and PE Market Trends

March witnessed significant volatility, primarily driven by the Red Sea logistics issue. Panic buying caused a surge in PE and PP prices across the board. However, as the logistics situation stabilized, buyers adopted a more cautious approach, resulting in a moderation of prices of PP and PE towards the end of the month.

PE and PP Market Trends and Analysis

I. Shift in Buyer Sentiments

A drop in the enthusiasm shown at the beginning of the year gave way to a more tempered outlook among buyers. With the resolution of the Red Sea logistics issue, there is a clear visibility of calm in buyer sentiments as they rework their strategies in response to the evolving market conditions.

II. Price Trends

In March, there was a lot of activity in the market. Prices went up by a lot, as supply problems and high demand caused challenges for businesses. However, as the month progressed, prices began to stabilize, reflecting a gradual easing of the initial effect. This variability underscores the early stage of settlement negotiations, combined with delays in monomer settlements and the impact of the Easter holidays on market activity.

Factors Contributing to the Shift in April

I. Impact of Red Sea Logistics Issue

The initial panic buying caused by the Red Sea logistics issue was reduced as markets adapted to the situation. This led to a more stable environment in April, irrespective of lingering uncertainties.

II. Monomer Movements

The movement of ethylene and propylene, key monomers in the production of PE and PP, respectively, played a significant role in shaping market dynamics. While ethylene saw a modest increase, propylene witnessed a more substantial rise in April.

III. Supply-Side Dynamics

Supply dynamics differ depending on the type of plastic and geographic region. Although there’s a dip in the supply of linear low-density polyethylene derived from butene, challenges persist in specific segments of low-density fractional melt. This has contributed to ongoing challenges in the polypropylene market. Maintenance tasks and unforeseen disruptions further complicate the supply scenario.

IV. Demand-Side Influences

Changes in demand are affected by multiple factors, such as closures during holidays and economic outlooks. In Italy, Liberation Day and Easter holidays result in converters operating at lower rates, which somewhat lowers demand. Despite this, orders maintain a stable trend from March to April, Demand shows consistent levels from March to April, with no notable shifts. 

V. Cooling of Panic

A notable trend observed from March into April is the panic relief that held the market earlier in the year. Spot prices, which experienced steady and consistent increases, have begun to stabilize, signaling a return to equilibrium. This shift reflects a standardisation of market expectations and a normalization of trading activity.

Polyethylene Market Analysis

I. Trends and Pricing

Polyethylene prices exhibited a softer trend in April compared to March, with offers ranging from double digits to rollovers. Linear low-density PE prices showed signs of weakness, influenced by factors such as increased availability and pricing pressures from the US market.

II. Supply Dynamics

While overall PE supply improved, certain grades, such as low-density fractional melts, experienced tightness. Disputes over import arrival times further added complexity to the supply landscape.

III. Demand Trends

Despite holiday closures affecting converters’ operating rates, orders remained flat from March to April. However, subdued sentiment in regions like Germany tempered expectations for demand growth.

Polypropylene Market Analysis

I. Pricing Trends

Polypropylene pricing remained relatively balanced in April, with offers reflecting a mix of stability and minor fluctuations. Maintenance activities and unexpected disruptions contributed to the tightness in certain grades.

II. Supply Dynamics

While supply constraints persisted in some segments, overall availability was manageable for most PP buyers. Disputes over import arrival times added a layer of uncertainty to the supply outlook.

III. Demand Outlook

Demand for polypropylene remained steady in April, with no significant deviations from the previous month. However, holiday closures in Italy impacted operating rates, leading to a slight moderation in demand.

Comparison between PE and PP Markets

Polyethylene showed a softer outlook compared to polypropylene in April. While PE faced challenges such as weakening pricing and supply improvements, PP maintained a relatively balanced stance, although with pockets of tightness.

OFB’s Insight on Virgin PE and PP Markets

As April unfolds, the virgin PE and PP markets move through a situation built by shifting dynamics and changing market conditions. While the situation of panic buying decreases challenges persist, requiring stakeholders to adopt a balanced approach to navigating uncertainties.

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