Curtailed Russian Energy Supplies Pressurizes German R-LLDPE Market Sentiments

Frankfurt, Germany: Recycled Linear Low-Density Polyethylene (R-LLDPE) prices have gained upward momentum and modestly surged from l3rd week of June FOB prices. The exorbitant energy prices, robust demand, and healthy market sentiments from food packaging, pharmaceuticals, and several other key industries for sustainable recycled products have a cumulative effect on the mounted price trends of R-LLDPE in the German domestic market.

On the other hand, the uncertainty in Russian supplies has exacerbated the market's inquiries for essential energy raw materials. The reduction in gas supplies from Russia after the sanctions imposed by the US and EU nations amidst its invasion of Ukraine has created enough inflationary pressure on the manufacturing costs for recycled products. The restrained supply of natural gas and crude oil has provoked the US to diversify its resources and fulfill the current demand of the struggling nations. Subsequently, the significant cut in gas flows has triggered the European nations to consider coal to compensate for the sharp drop in Russian gas supplies and avoid winter gas shortages.

This week in Germany, the FOB prices for R-LLDPE-Translucent Pellets have shown an increment of USD 30 per ton from June 1st, 2022, causing a significant headwind in the manufacturer's quotations. Additionally, the German government has emphasized new regulations for recycling companies to re-design their operational processes to comply with the requirements for a circular economy, further inflicting the bullish market sentiments for recycled plastics. Moreover, the prices of upstream ethylene have also escalated by approximately 1.8% from last week's prices amidst bullish macroeconomic factors supporting the R-LLDPE augmented price trends.

As per ChemAnalyst, the prices of R-LLDPE may witness a bullish trend in the forthcoming periods amidst hiked operational costs and strong demand from end-user industries. Also, the curtailed supply of energy raw materials from Russia may induce a gas supply shortage in the near term, wreaking the input cost to soar further and burgeoning the market value of R-LLDPE.