Force Majeures to dent the US and European Polypropylene supply

Houston, USA: Even as INEOS Polymers and LyondellBasell continue their force majeures that were announced in the last week of March, more producers have in the last one week joined the bee line including Total Energies. ExxonMobil too had recently notified its customers that it would start allocating selected grades of Polypropylene resin citing operational constraints as the major driving force behind the decision. The European production scenario is no different with France’s Total Energies declaring a force majeure on its Polypropylene production in the second week of February.

The North American resin supply had already been severely impacted due to rail car unavailability and the consequent levy of surcharge by major logistics companies on rail car shipments for the month of May. With natural gas prices consistently higher than the USD 7/MMBtu mark in May, operational costs for Polypropylene resin manufacturers are bound to increase. All these factors combined could prompt manufacturers to collectively push for a raise in their May offers. Conversations with major producers in the Gulf coast region point to a price push in the range of USD 1.1/Kg to USD 1.5/kg in the month of May.

Europe on the other hand could see supplies stabilizing after two months of extreme volatility in the feedstock monomer market. Although, ChemAnalyst predicts crude oil prices to be higher than the April levels, production levels and inventories are improving as suggested by the most recent data for the last week of April and could offset the feedstock cost pressure by a significant margin. In the United States however, natural gas liquids (Ethane and Propane) prices have been on a rise again in the past week as Natural Gas prices have consistently stayed above or near the USD 8/MMBtu mark.

While the spot market in the US could see prices of Polypropylene rise significantly, Europe could see prices stabilize taking into consideration, stability in downstream demand and improved supply of propylene monomer. Liquified Natural Gas supplies to Europe are expected to continue their stability through out the month of May and could function as another stabilizing factor. Rising crude oil prices may have an impact on feedstock costs but the Polypropylene market in Northwest Europe as per ChemAnalyst’s assessment is not going to be troubled by any increase in upstream cost pressure as stable demand and a stabilizing energy scenario are likely to be the key determinants for the quarter ending June.