European Market Grapples with Polyol Price Escalation Amid Production Disruptions

In February 2024, the Polyol prices witnessed a marginal increment of 1.2% in the European region. At the beginning of the month, the production rates of feedstock Propylene Oxide were afflicted by the tight availability and delayed supplies of upstream Propylene from the US exporters due to trade problems through the Suez Canal. Consequently, the production costs of Polyol increased due to an increase in the feedstock Propylene Oxide prices because of the limited availability of supplies and firm demand from downstream Glycol manufacturers. The Eurozone's Manufacturing Purchasing Manager's Index declined marginally in February 2024 compared to the previous month and remained below 50, indicating a slowdown in manufacturing sector activities. Consequently, the availability of stocks was inadequate in the market due to a slight decline in the production rates and moderate offtakes from the buyers during the month.

The Polyol demand was moderate to produce Polyurethane components in the Polyurethane segment as the construction sector saw a rise in outlook due to hopes of rate cuts. The orders for Polyol remained sluggish due to the decline in production and sales of coatings and paints. The decrease in production rates was due to the decrease in raw material supplies caused by the recent disruptions in the global supply chain. Similarly, the wood furniture sector also faced a decline in demand for PU foam and PU key component Polyol owing to reduced production caused by the extended lead times in procuring raw materials. On the other hand, the automotive industry witnessed a surge in demand for Polyol amid the rise in the production of electric vehicles and the need for lightweight PU materials. Additionally, the textile industry witnessed a slowdown in February 2024 amid the rise in raw material costs and ample availability of previous stocks, which further suppressed the demand for Polyester Polyol.

According to the ChemAnalyst data sources, the Polyether MW 3000, μ 400-650 FD Antwerpen quotations in Belgium witnessed USD 1900/MT at the end of February 2024.

As per the estimation, the Polyol price trend will remain firm in the European region, and prices will increase further towards the end of the first quarter of 2024 due to firm stoking practices before the beginning of next quarter. The demand is anticipated to escalate from the Polyurethane segment at the beginning of Q2 2024 because of the estimated increase in construction activities in the region. The inadequate availability of supplies towards the end of the quarter would impact the Polyol quotations. Additionally, the anticipated increase in feedstock Propylene Oxide costs due to the increase in import costs of upstream Propylene will raise the cost support on production costs of Polyol.