The European market will operate in a kind of stop and go mode in 2024. This means that larger polymer manufacturers will schedule maintenance at different sites, thus limiting their emissions at the company group level. The challenge is not small, in order for the European polymer market to be balanced, the total polymer production must be reduced by almost 20% in 2024 compared to 2021. It is not yet clear what single-site polymer producers, especially those integrated with a refinery, can do? They will probably continue to produce except for minor maintenance. Unless the chemical feedstock or monomer can be utilized in another way, even as an energy carrier, as we experienced at the end of 2023.
On the supply map of Central Europe, we expect some major changes in the supply structure. Western European manufacturers are likely to establish a greater presence in our region, as this market has greater growth potential. Some large European manufacturers want to create new logistics hubs in Central Europe in 2024. But big international traders also have similar plans. The increasing supply in Western Europe is counteracted by the increase in freight and road fees throughout Europe, especially in Germany.
Due to the rising cost of road transport, the geographical radius that can be served efficiently and profitably decreases, and the value of locally produced polymers is increasing. That is why – contrary to Western European trends – PP and HDPE capacity expansions are expected in the South Central European region (SCE) in the coming years.
In 2024, we are already expecting significant progress this year in recycling. Already towards the end of 2023, it was apparent that the demand for good and stable quality recycled materials had increased, thanks to the approaching deadlines of 2025 and 2030. Major polymer manufacturers are trying to enter the recycling business by acquiring regional recycling companies. This trend, industry concentration, will continue in 2024, while the regional availability of high-quality waste remains limited. Also, due to the high freight charges, the possibilities for purchasing imported waste will continue to narrow. All of this is expected to mean a noticeable price increase, first on the recycled polyethylene market, then on the polypropylene and polystyrene market as well. For now, the question is whether the widespread use of regranulates will reduce the demand for virgin polymer? In Central Europe, virgin-recycling compounds are not expected to spread, or they are expected to be more widespread, and they are hybrid solutions directly from polymer manufacturers. These can ensure stable and continuous, repeatable quality for plastic conversion. For the independent recyclers, the small South Central European polymer producers can be a hope, who struggle with profitability problems due to their high specific production costs, but in cooperation with the recyclers they can produce high-quality virgin-recycling compounds or special virgin polymers for the recyclers themselves.
In terms of economic processes, we are facing a difficult first half of 2024 and a less difficult second half. Due to the expected continuously decreasing inflation and interest rates, the economy will slowly gain strength and growth may begin, which will not be comparable to previous years, as energy and feedstock prices will remain high. In the second half of the year, the construction industry will probably also start to grow. We will probably be able to avoid recession at the European level in 2024, but real prosperity will still have to wait. This year will be characterized by a kind of consolidation, many smaller converters will merge into larger companies or just disappear permanently.
Looking at the difficulties ahead, pessimism seems more realistic, but let's be optimistic! Central Europe will be the European region showing the fastest growth, and this will probably happen as early as this year.
Laszlo Budy, myCeppi
