Europe PP & PE Markets Enter September Under Cost Pressure

Europe’s PP and PE markets are heading into September facing another test of whether higher feedstock costs can be passed through to polymer prices. In August, the €55/ton rise in the propylene contract and €42.5/ton increase in ethylene led producers to seek higher prices, but weak holiday demand limited the extent of the increases, with actual gains generally falling short of initial targets.

The outlook for September remains uncertain. Ethylene and propylene are expected to settle higher again, which could encourage producers to pursue further increases. At the same time, the end of the summer holiday period may bring some restocking activity. However, several converters had already covered material in early August, including some September requirements, which could limit the speed of demand recovery.

August Cost Pass-Through Remains Limited

In PP, the €55/ton increase in the August propylene contract prompted producers to target increases of around €50/ton. Actual transactions varied, with some distributors securing modest hikes while others eventually accepted rollovers. Some special deals were also reported below July levels.

PE saw a similar situation. Traders reported increases of roughly €30-50/ton depending on the grade, while some deals were concluded at rollovers or with smaller increases. As a result, both markets moved away from their previous downward trend, but polymer prices generally did not fully reflect the rise in feedstock costs.

Seasonal demand remained the main challenge. Italy was particularly quiet during the summer holiday period, while activity in Northwest Europe was relatively stronger as buyers returned earlier. Several converters had also purchased material during the first half of August, including for September needs, reducing their requirement for additional purchases later in the month.

Tighter PE Supply Adds Support

Supply conditions provided additional support for some PE grades, particularly LDPE. Sabic declared force majeure on LDPE supplies from Geleen after its units were shut down in early August, while Borealis’ LDPE unit in Schwechat, Austria, was taken offline for maintenance.

HDPE availability was also reported to be tighter from some Central European producers, while production restrictions at an Italian supplier affected certain LLDPE and HDPE grades. LLDPE supply was described as relatively limited as well, with one buyer reporting reduced volumes from a US supplier.

Middle Eastern import availability has also been affected by ongoing disruptions in Saudi Arabia. Heavy congestion at Jeddah port continues to delay shipments and extend delivery times, adding further uncertainty to regional cargo availability.

These supply constraints have placed LDPE under stronger upward pressure, while tighter LLDPE availability and restricted Middle Eastern supply have provided support across the wider PE market. PP sellers have also benefited from relatively limited import availability, reducing competition from overseas material.

September Restocking Could Determine Price Direction

Market attention has now turned to the September ethylene and propylene settlements. Current expectations generally point to increases of around €20-40/ton for both monomers.

If these increases materialize, producers are likely to return to the market with fresh hike attempts. PP suppliers could initially target around €50/ton, although another partial pass-through may be more realistic if demand remains subdued. In PE, tighter availability of LDPE and selected LLDPE and HDPE grades could provide producers with greater pricing power, potentially allowing increases in line with or above the ethylene settlement depending on the grade.

The main question is whether PP prices will again trail the propylene increase, while PE gains could have greater scope to match or exceed the movement in ethylene. The end of the holiday season should bring buyers back, and some new inquiries have already appeared. However, comfortable inventories following early-August purchases could delay significant replenishment until later in September.

Imports Could Limit PE Increases

Import competition may also restrict the size of potential PE increases. US PE cargoes for October delivery are being offered around current European market levels. While these offers are not particularly aggressive at present, they could become more competitive if European producers raise domestic prices significantly.

Asian supply is also attracting attention following South Korea’s first container shipping trial through the Arctic Northeast Passage on August 22. A South Korean producer is reportedly offering selected PE grades through the route. Freight costs are around €30/ton higher than conventional shipping, but transit time could fall to roughly one month from about two months.

Although the route is still experimental, the trial reflects efforts by Asian suppliers to shorten delivery times into Europe and could eventually provide greater import flexibility if regular commercial services become viable.

Geopolitical Developments Add Further Uncertainty

Logistics disruptions continue to offer some support to European producers. Low Rhine water levels are affecting inland transportation, while traffic through the Strait of Hormuz remains significantly below normal. Congestion at Jeddah and other Gulf logistics hubs is also affecting shipping schedules and European import flows.

However, the geopolitical outlook has become more mixed. Renewed talks between Iran and Oman regarding a temporary navigational corridor through Hormuz have raised hopes of gradually easing shipping restrictions. Brent crude extended its losses and fell below $90/bbl on August 25. Despite this, Hormuz traffic remains well below pre-conflict levels, meaning disruption risks remain.

Further easing of tensions and lower crude prices could weaken producers’ cost arguments, while renewed escalation or continued shipping constraints could quickly restore upward pressure.

PP and PE Could Follow Different Paths

September begins with a firmer feedstock outlook, but PP and PE may not experience the same degree of cost pass-through. August showed that higher monomer costs alone were not enough to deliver equivalent polymer increases amid weak demand.

PP is likely to face another partial pass-through unless post-holiday demand strengthens significantly. PE appears better positioned, particularly where supply remains tight, potentially allowing some grades to match or exceed the ethylene increase.

Ultimately, September pricing will depend on the strength of restocking, buyer inventory levels, import competition and geopolitical developments. Stronger demand could improve producers’ pricing power, while slow replenishment, competitive imports or further crude oil declines could limit the potential for increases.

Stay ahead of market trends with the Credco app. For any queries, please reach out via WhatsApp at +91 8448083211.