Expected dynamics of commodity polymer prices in the third quarter of 2024

Expected dynamics of commodity…

The year 2024 is characterized by weak demand so far. Basically, the European market has become oversupplied, one of the reasons for which is the deteriorating export possibilities of European-made polymers, and the other is the stagnation or decline of European consumer demand and the resulting industrial production. All of this has an impact on the plastics industry as well, the direct consequence of which is a smaller-than-usual backlog; and the fact that the converters are working with smaller polymer stocks than usual, trying to maintain their purchasing flexibility and cash-flow position. All this is not easy, because supply and demand and prices fluctuate.

In the last two years, we experienced 4 price waves, which followed each other in a period of 22-24 weeks. The first two waves were smaller and occurred at a higher price level. However, the latter two, which took place in the past year, were already clearly noticeable for all polymers for all market participants.

The waves follow the logic below. When European prices are low or start to decrease, as is the case now, when imports slow down, and at the same time, many European manufacturers reduce their production; availability will drop. As converters have relatively low polymer inventory levels, they are quick to panic, and minor panics are not uncommon. This gives European manufacturers the opportunity to raise prices. However, due to weak demand, price increases cannot be too steep or too large, as competitors are quick to exploit pricing errors. The higher price level immediately stimulates imports and European polymer production, which slows and at the same time limits price increases. Based on the 4 price waves of the last 2 years, we can conclude that a full price wave means a movement of 250-350 €/t from the bottom to the top.

The duration and wavelength of the price wave depends significantly on the duration of sea transport and the restart of European plants. The European market will operate in stop and go mode in 2024. This means that larger polymer manufacturers schedule maintenance at different sites, thereby limiting their emissions at the company group level. Also, unplanned shutdowns of FMs are becoming more and more frequent.
Now we are heading towards the "wave valley" following the first "wave crest" of the year. Market participants are primarily concerned with the question of when prices will reach their bottom value in this period, what will be the "bottom" and how long will the low-price period last?

This year's first price wave reached its maximum in the 10th week, in the case of polypropylene it peaked for 4 weeks, until mid-April, and then started to decrease. In the case of polyethylene, the turnover was faster; after the 10-week peak, prices started to decline. For both polyolefins, prices can be expected to bottom out by the end of May. Logically, the "bottom price" of the price range should be represented by import prices. However, now the imbalance is not caused by the oversupply due to the influx of imports, but rather by the lack of demand. Thus, it is likely that European polymer prices, especially in the case of HDPE, PPC and PVC, will go below the import price level, as there are already sporadic examples of this. Behind everything is the relatively broad European supply. In the case of LDPE, European prices approached import prices, but the supply, especially of MFR 0.3 grades, is by no means as wide as that of HDPE. Thus, it is unlikely that LDPE prices will fall near or below €1,100. In the case of PPH, tight supply is an obstacle to price reduction, especially in the case of IM and non-woven textile grades with high MFR. For grades between MFR 2.5-4, there is an import supply, the cheapest prices are still above €1,100, it is expected that some European manufacturers will also reach this price level. We do not expect PPH prices below €1,100.

However, in the case of polystyrenes, the price reduction of European products is primarily driven by the expected decrease in the price of stryene monomer in the next 2 months. For this reason, it is likely that the prices of European products will go below import prices by July. In the case of EPS, this can happen at the end of May, beginning of June. Especially because the import prices reflect the situation 6-8 weeks earlier due to the long delivery time.