Since the beginning of this year, the price of Polypropylene (PP) in Europe has shown a steady upward trend. Market insiders point out that part of the reason for this phenomenon is the increase in raw material costs, but the main reason is the Red Sea attack, which has restricted logistics through the Suez Canal, reduced import supply throughout the European continent, prompted downstream buyers to purchase local supply, and pushed up PP spot prices. According to Platts, a subsidiary of S&P Global, as of the week ending February 14th, the average spot price of PP Resin in Northwest Europe was 1222 euros (ton price, the same below), an increase of 30 euros from the previous week, and an increase of 204 euros, a 20% increase, compared to the week ending January 10th. The average price of copolymer PP Resin is 1310 euros, an increase of 40 euros from last week, and an increase of 225 euros since early January, an increase of 21%.
In February, the contract price of polymer grade propylene (PGP) was 1065 euros, an increase of 15 euros from January and unchanged from December last year. PGP spot prices have seen a greater increase. The price for the week of January 4th was 824 euros, and as of February 9th, it has risen to 997 euros, with an increase of 173 euros.
Market participants emphasized that the main factor contributing to the price increase of PP resin in Europe is supply constraints. They pointed out that demand in most major PP derivatives industries remains weak, and price increases are not due to rising demand. According to relevant sources, in fact, demand has not yet strengthened, but due to supply chain disruptions, many buyers have returned to the local European market, resulting in an increase in European PP prices. Due to the ongoing attacks by the Housai armed forces on commercial shipping in the Red Sea, the supply from the Middle East and Asia to Europe continues to be delayed, resulting in increased freight and costs for goods traveling between Asia, the Middle East, and Europe.
In addition, Total Energy announced an extension of its European PP supply due to force majeure, with its Feluy factory in Belgium and PP factory in Gonfreville, France continuing to shut down due to "technical issues". According to S&P Global's data, the nameplate production capacity of the Gongfrevelle PP plant in France is 209000 tons per year. On July 25, 2023, its 750000 ton/year Belgian Feluy factory announced for the first time that the supply of PP resin in Europe had encountered force majeure due to technical issues and has not yet resumed. This further exacerbates the supply shortage of PP in Europe. In addition, in the first half of 2024, Austrian petrochemical producer Nordic Chemical plans to shut down its PP plant in Bellingen, Belgium for maintenance in the second quarter, which will also affect PP supply in Europe. S&P Global believes that the PP spot market in Europe will remain tight in the first half of the year. However, distributors have stated that the supply shortage caused by shutdown maintenance will mainly affect the PP spot market, and Total Energy's force majeure is not a major issue as its impact is limited.
As an important import source of European PP, Türkiye PP is concerned. As of the week of February 14, the price of PP resin in Türkiye was mixed, because the manufacturer's quotation faced weak demand. According to S&P global data, Türkiye's PP spot price was $1240 on February 14, up $30 from last week. Although the price of fiber grade PP in Türkiye remained stable, the quotations from several suppliers increased compared with last week. The prices of brushed and co polymer PP have slightly declined due to less optimistic purchasing interest, and many buyers are adopting a wait-and-see attitude. Market sources indicate that some buyers are still waiting for prices to fall before entering the market. However, the current bullish fundamentals mean that the likelihood of a significant decline in the short term is very low.
In addition, Saudi Arabia will not encounter armed attacks when transporting PP to Europe via the West Coast. During the week of February 14th, the Saudi Arabian PP market remained stable. The start of the agricultural cultivation season has led to a surge in local demand. At the same time, multiple PP plants in the local area have been shut down, and external downstream demand parties have intensified the pre procurement of remaining PP, further tightening Saudi Arabia's PP supply to Europe. According to S&P global data, on February 14th, the spot price of Saudi Arabia's brushed PP was $990, which remained stable compared to the previous day and last week. Downstream buyers still hold a cautious attitude towards Saudi PP, as three PP plants are expected to be shut down for maintenance in February. Al Waha Petrochemical Company's 450000 ton/year PP plant located in Jubail, Saudi Arabia has been shut down and undergoing routine maintenance, which is expected to last for 3 to 4 weeks. PP producer Advanced Petrochemical also stopped work and began maintenance in the first week of February. Its factory is located in Jubail, with a PP production capacity of 450000 tons per year.
