Polypropylene falls further amid lockdowns and geopolitical turmoil

Even as the global petrochemicals market struggle to keep up with the in the geopolitical turbulence in Eastern Europe and extremely and an extremely volatile crude oil and energy markets, polypropylene demand fails to rally on surging crude oil prices and a skewed global logistics scenario. While market experts and players alike find it difficult to fathom the enigma of the global crude oil market trend which according to most estimates should see a downtrend on the back of demand vacuum from China and a skewed global freight scenario, both the Polypropylene and monomer markets have been underperforming despite a surge in crude oil prices in May 22.

Chinese spot Polypropylene shaved off a tad more than 1% week on week in the second full week of May. Indian scenario is not far off with Reliance Industries Limited (RIL), Indian Oil Corporation Limited (IOCL), Haldia Petrochemicals Limited (HPL) and HPCL-Mittal Energy Limited (HMEL), all revising their prices downward May for the second time. This collective downward push comes in response to a sudden demand vacuum created in China due to the surge in Covid-19 cases and the consequent lock downs and logistic bottlenecks as a direct result of the pandemic.

US Polypropylene producers have been collectively pushing for a USD 0.06/lb price push on their May contracts leveraging the current market scenario where three of the major producers including LyondellBasell have been under Force Majeure since the last week of March creating a supply crunch in the domestic market. With natural gas prices far from reaching the pre-war (Russia-Ukraine) levels Propylene monomer continues to underperform in the spot market despite persistent feedstock (propane) price pressure, due to sluggish downstream demand from the PP market. The PP spot market itself continues to remain flat for the third consecutive week even as Force majeures and extreme volatility in the crude oil and natural gas markets have been exerting upward pressure on the resins market.

ChemAnalyst predicts the Polypropylene resin demand to pick up by the last week of May to first week of June period as macro demand, traditionally, picks up in the Asia Pacific region with the onset of monsoon season. The global energy markets, as per our analysis, will continue to witness extreme volatility and supply crunch well into the second half of 2022. Major oil producing countries continue to lag on their production targets as was the case for the last three consecutive months. The prevailing supply tightness in the energy and upstream markets will have gathered enough momentum by the last week of May to push the prices of Polypropylene beyond the demand-pull threshold.