Europe PP, PE Prices Face Fresh Cost Pressure as September Approaches

European PP and PE markets are entering September with renewed cost pressure, but producers may again struggle to pass higher monomer costs fully through to polymer prices. In August, propylene contract prices increased by €55/ton and ethylene by €42.5/ton, prompting suppliers to seek higher polymer prices. However, weak summer demand limited the success of these attempts, with actual increases generally falling short of producers’ initial targets.

The September outlook remains uncertain. Both ethylene and propylene are expected to settle higher again, potentially encouraging another round of price increases. At the same time, the end of the summer holiday period could bring buyers back to the market and support some restocking. However, several converters already secured material during early August, including requirements for September, which could limit the immediate strength of demand.

August increases fall short of monomer gains

The rise in August propylene costs led PP producers to target increases of around €50/ton. Actual market movements were more moderate, with some distributors achieving small gains while other sellers ultimately accepted rollovers. A few special deals were even reported below July levels.

PE followed a comparable pattern. Depending on the grade, traders reported increases of approximately €30-50/ton, while some deals were concluded at unchanged levels or with smaller adjustments. Although both PP and PE moved away from their earlier downward trend, polymer prices did not fully reflect the rise in feedstock costs.

Holiday-related inactivity remained a major factor. Italy was particularly quiet during the summer break, while Northwest Europe showed relatively stronger activity as market participants returned earlier. Early purchases by several converters further reduced the need for additional buying later in August.

PE supply restrictions strengthen support

Supply fundamentals have provided additional support to the PE market, particularly for LDPE. Sabic declared force majeure on LDPE supplies from Geleen after production units were shut in early August, while Borealis took its LDPE facility in Schwechat, Austria, offline for maintenance.

Availability of HDPE was also reported to be tighter from some Central European suppliers, while production limitations at an Italian producer affected selected LLDPE and HDPE grades. LLDPE supply remained relatively restricted as well, with one buyer reporting lower allocations from a US supplier.

Middle Eastern supply has faced further logistical challenges. Disruptions in Saudi Arabia have restricted regional availability, while congestion at Jeddah port has caused shipment delays and extended delivery times. These factors have particularly supported LDPE, while tighter LLDPE and selected HDPE availability has also helped maintain a firmer tone across PE.

PP producers have likewise benefited from limited import availability, reducing competition from overseas material.

September demand will determine pricing power

Attention is now turning to the upcoming September monomer settlements. Market participants generally expect both propylene and ethylene to increase by around €20-40/ton.

Such movements would give producers another reason to seek higher polymer prices. PP suppliers could initially target increases of approximately €50/ton, although weak demand makes another incomplete cost pass-through more probable. PE producers may have greater pricing leverage in LDPE and selected LLDPE and HDPE grades because of tighter supply, potentially allowing increases to track or exceed the rise in ethylene.

The major question is whether buyers will return to the market strongly enough to support these ambitions. The end of the holiday period should generate fresh inquiries, but many converters still hold sufficient stocks following purchases earlier in August. This could postpone meaningful replenishment until later in September.

Imports could restrict PE price gains

Import competition remains another potential limitation on European PE increases. US material for October shipment has been offered around prevailing European levels. While these offers are not currently particularly aggressive, they could become more competitive if European producers attempt substantial price increases.

Asian suppliers are also exploring alternative logistics routes. South Korea recently conducted its first container shipping trial through the Arctic Northeast Passage for chemical shipments to Europe. One South Korean producer is reportedly offering certain PE grades using the route. Freight costs are estimated to be around €30/ton higher than conventional routes, but transit time could be reduced to roughly one month compared with approximately two months by traditional shipping.

Although the route is still experimental, successful development could eventually provide Asian suppliers with another option for reaching Europe more quickly.

Geopolitical risks create mixed signals

Logistics disruptions continue to offer some support to European producers. Low water levels on the Rhine are affecting inland transportation, while shipping through the Strait of Hormuz remains significantly below normal. Congestion at Jeddah and other Gulf locations is also disrupting schedules and limiting the reliability of imports.

However, geopolitical developments could shift the cost picture. Recent discussions between Iran and Oman regarding a possible temporary navigation corridor through the Strait of Hormuz have raised hopes that shipping restrictions could gradually ease. Crude prices have already reacted to these developments, with Brent falling below $90/bbl on August 25.

Nevertheless, Hormuz traffic remains well below pre-conflict levels, meaning the possibility of renewed disruption remains. A further easing of tensions could weaken producers’ cost-based arguments, while any escalation could quickly restore pressure on energy and logistics costs.

PP and PE may take different paths in September

September is therefore likely to bring another test of producers’ ability to transfer higher costs into polymer prices. August demonstrated that rising monomer costs alone were insufficient to generate equivalent increases in PP and PE, particularly with downstream demand remaining subdued.

PP is likely to see another partial cost pass-through unless post-holiday buying improves significantly. PE may have stronger support, particularly in grades affected by production and supply constraints, allowing some prices to move closer to or potentially above the corresponding ethylene increase.

Ultimately, the strength of September restocking, buyer inventory levels, import competition and developments in crude oil and regional logistics will determine how far prices can rise. A strong return in demand would strengthen sellers’ position, while cautious purchasing, competitive imports or softer energy prices could limit the scope for further increases.

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