Weak Downstream Demand Lowers German Propylene Prices During May 2024
Weak Downstream Demand Lowers German Propylene Prices During May 2024

Weak Downstream Demand Lowers German Propylene Prices During May 2024

  • 04-Jun-2024 2:01 PM
  • Journalist: Jacob Kutchner

The European market for Propylene, a crucial building block for various plastics, has experienced a downturn throughout May 2024 amidst lower-than-expected demand and an oversupply situation. This has resulted in a significant drop in Propylene prices across the continent due to weak demand from downstream sectors. The peak season for beverage bottling, a major consumer of Propylene for plastic bottles, failed to materialize as strongly as anticipated following the Easter holiday period. This unexpected dip in demand from the downstream sector put a damper on the overall market.

As per the recent assessment, the Propylene prices have declined in Europe from 1050 USD/MT to 1014 USD/MT to admit a drop of 3.4% for FD Hamburg, Germany during May 2024. A general lack of confidence has subdued the market fundamentals during this timeframe. Uncertainty in the broader economic climate has led to a cautious approach from converters, who are hesitant to commit to large purchases as they were adopting a cautious approach, ordering Propylene only as immediate needs arise which weakens overall demand. Moreover, the oversupply situations create a buyer's market. Propylene producers in Germany were facing a situation where supply outweighed demand leading to excess inventory in hand. This surplus creates a buyer's market, where lower prices incentivize purchases but ultimately erode profit margins for producers. Meanwhile, businesses were hesitant to make large, long-term commitments at this point, preferring to wait for a more stable pricing environment further eroded the market sentiments. Additionally, the feedstock Crude oil price decline aids producers as cheaper raw materials have provided some relief to Propylene producers. This lower acquisition cost helps to partially offset the reduced selling price of the product during this timeframe.

However, disruptions in logistics were not enough to rebound the Propylene’s price trend during May 2024. While challenges like bad weather, port closures during holidays, and labor disputes have caused congestion at some North European terminals, major ports like Bremerhaven and Rotterdam have managed to maintain efficient operations.

As per ChemAnalyst, the market for Propylene in Germany is expected to remain flat amidst expected subdued spot market activity which lowers the premium offers. The European Propylene spot market, where deals are made for immediate delivery, reflects the current situation with offers hovering around flat levels or carrying only slight premiums compared to established monthly contract prices. This indicates a lack of urgency and a buyer's market in the upcoming weeks as well.

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