For the Quarter Ending September 2023
In the third quarter of 2023, the North American Polypropylene (PP) market exhibited a mixed trend. The US market began the quarter on a bearish note, with a 1% decline in prices, attributed to a simultaneous 2% decrease in the price of feedstock Propylene. This decline in feedstock costs helped reduce the overall production expenses, providing a glimmer of relief amidst the prevalent inflationary pressures. Unfortunately, the persistent inflation made it challenging for consumers to fully indulge in activities such as barbecues and their corresponding beverage consumption. During the early months of the quarter, the market saw an oversupply of PP, and both manufacturers and traders were optimistic about robust summer seasonal demand. However, these expectations fell short as demand failed to keep pace with the ample supply, leading to a continued bearish price trend. Nevertheless, there was a turnaround in the last two months of the quarter, with prices increasing by approximately 3% and 3.5%, respectively. This price rebound was influenced by a concurrent 5% increase in the price of feedstock Propylene, providing some much-needed support to the PP market. Moreover, the market experienced a positive influence from the automotive industry, with the price index for vehicles rising by 0.2% in August, following a similar increase in July. This growth was primarily driven by higher prices for vehicle parts and passenger cars, signifying the vitality of the downstream automobile sector in influencing the PP market during this particular month.
During the third quarter of 2023, the Asian PP market witnessed a bullish trend, particularly notable in the Chinese sector, where prices surged by approximately 2.5%. This upward price trajectory was primarily attributed to a substantial decrease in the overall supply of PP in the country. The primary contributing factor to this supply crunch was the occurrence of multiple plant shutdowns across China. Prominent facilities such as Sinopec Tianjin Lianhe, Zhangjiagang Yangtze Petrochemicals Co, Hebei Haiwei Group, North Huajin Chemical Industry, and Dongguan Juzhengyuan all faced temporary closures, thereby diminishing the available stock. Amidst these supply constraints, there was a modest increase in demand when compared to the preceding quarter. Downstream plastic weaving production remained relatively stable, and enterprises engaged in film materials and injection moulding continued to operate at approximately half their capacity, thereby sustaining a relatively consistent market outlook. Terminal enterprises adapted to the market by stocking based on demand procurement, and the industry exhibited a gradual warming trend as it entered the traditional peak season. Additionally, the third quarter saw a notable surge in the price of upstream Crude Oil, which escalated by approximately 24%. This uptick in crude oil prices played a pivotal role in elevating the production costs of PP, thereby further impacting market dynamics. These various factors combined to shape the landscape of the PP market in the Asian region during the third quarter of 2023, with supply disruptions, increasing demand, and rising production costs being the key drivers of market trends.
In the third quarter of 2023, the European polypropylene (PP) market experienced a dynamic pricing landscape marked by fluctuations. The Italian market witnessed an initial 3.8% price decrease, primarily attributed to a 1.1% drop in the price of the essential raw material, Propylene, within Italy. This decline was exacerbated by reduced demand from downstream packaging industries due to inflationary pressures across the region, impacting the product's pricing. Simultaneously, the global market saw a decline, compounding the challenges faced within Italy. However, the latter part of the quarter brought some relief, as the price of PP increased by 1% and 2.5% in the last two months. This upswing was driven by an improved global trading outlook, even though domestic demand in Europe remained modest. Meanwhile, a 24% increase in the price of upstream Crude Oil posed a challenge to production costs, further contributing to the bullish trend in the European PP market. The United States, a key supplier of PP to Europe, experienced severe supply chain disruptions during the quarter due to a hurricane. Critical components of the supply chain, such as airports, marine cargo ports, and distribution hubs, ceased operations or reduced activities, leading to supply constraints. Major parcel delivery companies also temporarily closed facilities and experienced ongoing service disruptions, especially in affected areas like Florida and Georgia. These logistical challenges exacerbated supply issues in the European PP market, creating additional obstacles for the industry during the quarter.
During the third quarter of 2023, the South American PP market witnessed a fluctuating landscape. In the United States, the price of Polypropylene (PP) experienced an initial 1% decline, mainly influenced by decreasing product costs in international markets, particularly within the USA. This drop was further exacerbated by the price fluctuations of Propylene, which had a direct bearing on Polypropylene prices in Brazil. However, despite these challenges, the supply of PP within Brazil remained relatively moderate to high, ensuring a balanced market environment. The demand from the downstream BOPP Film industry remained steadfast, displaying resilience against these price fluctuations. Nevertheless, in the final two months of the quarter, the Brazilian PP market turned bullish, primarily attributed to a substantial 5% surge in the price of its feedstock, Propylene, within the same period. Furthermore, the price of upstream Crude Oil also saw an increase in Brazil, contributing to the overall price trend of PP. Despite these fluctuations, the demand for PP in the country remained relatively stable, although some upward pricing pressures were observed. In terms of economic policy, Brazil's central bank made a notable move by reducing its benchmark interest rate by half a percentage point for the second consecutive time, lowering it to 12.75%. This decision underscores the central bank's commitment to combat inflation, which has consistently remained below its target.
In the third quarter of 2023, the Middle Eastern polypropylene (PP) market displayed a mixed pattern. Initially, the Saudi Arabian PP market experienced a 1.5% price decrease, primarily due to increased PP supply resulting from cheaper feedstock Propylene prices and a weaker demand attributed to the economic slowdown. Additionally, lower prices of PP substitutes further eroded its demand. However, the latter part of the quarter saw a reversal, with PP prices increasing by 1.6% and 1.7% due to a bullish trend in feedstock Propylene prices, closely linked to a 24% surge in Crude Oil prices. This shift in oil prices can be attributed to the decision of OPEC+ to maintain production cuts in Saudi Arabia and Russia, resulting in inventory declines and positive implications for the oil market. Notably, the US Energy Information Administration reported a significant 17.049 million-barrel drop in crude oil inventories, reaching a total of 440 million barrels. The reduction in finished oil storage, particularly in gasoline inventories in the US, signifies a positive trend. These developments will likely continue to influence the PP market as we enter the fourth quarter.
For the Quarter Ending June 2023
During the second quarter of 2023, the North American Polypropylene market experienced a decline in prices. In the Mexican market, the price of the product decreased by around 5.5%, 6.3%, and 5.2% during this quarter. This drop was primarily influenced by the decrease in the price of feedstock Propylene, which fell by approximately 17.5%, 13%, and 10% in April, May, and June, respectively. The declining prices of crude oil, the upstream for Polypropylene, also played a significant role, falling by around 9% and 3% in the last two months of the quarter. Global economic concerns and the possibility of interest rate hikes in the United States and Europe further impacted oil prices in June 2023. Despite these challenges, US companies signaled a further expansion of business activity at the end of the second quarter, although the rate of growth slowed to a three-month low. Manufacturers experienced a renewed contraction in production, while service providers saw a slower pace of growth. As a result of subdued demand, firms sought to run down their stocks and reduce input purchasing in June, with input buying falling at the steepest rate since January. Both pre-and post-production inventories declined sharply. Similarly, international demand saw a sharp fall in new export orders for manufacturers, while service sector firms recorded another marked monthly upturn in new business from abroad. By the end of the quarter, the price of Polypropylene Random Copolymer CFR Veracruz (Mexico) was recorded at USD 1377/MT.
The Asian Polypropylene market experienced a bearish trend during the second quarter of 2023. In South Korea, the price of Polypropylene decreased by approximately 2.8%, 1.4%, and 7% in April, May, and June, respectively. Similarly, in the Singapore market, the Polypropylene market experienced 12% negative growth throughout the quarter. The decline in Polypropylene prices was attributed to low-import costs offered to Singaporean traders, leading to a shift in market sentiment towards sluggishness. Furthermore, the drop in feedstock prices, which declined by approximately 0.5%, 4%, and 13% in April, May, and June, respectively, contributed to the downward pressure on Polypropylene prices. Demand from downstream producers, particularly in the construction and automobile industries, remained low as they refrained from stocking up ahead of the Labor Day Holiday. In China, the price of Polypropylene Raffia EXW Dalian declined by 6% during the quarter. The upstream market for Polypropylene witnessed falling prices across the board, with liquefied gas and crude oil prices dropping significantly. The main downstream BOPP Film also continued to decline, exerting a negative impact on the Polypropylene market. South Korea's economy showed signs of slowing down, particularly in exports and manufacturing, further contributing to the bearish sentiment in the region.
In the European market, the price of Polypropylene experienced a bearish trend during the second quarter of 2023. Prices for Polypropylene in Belgium, represented by FD Antwerp, declined by approximately 3% and 4% in May and June, respectively. This mirrored the drop in crude oil prices during the same period, influenced by lingering concerns over a slowdown in the global economy and potential interest rate hikes in the US and Europe. The demand from downstream industries, especially the construction and automobile sectors, remained lackluster, leading to an oversupply of Polypropylene in the European market. Supply chains across the eurozone construction sector improved significantly at the end of the second quarter, with notable reductions in average lead times. Additionally, Germany experienced a series of record improvements in vendor performance. Competition from smooth and cheaper imports of Polypropylene from countries like Saudi Arabia and the United States further impacted the European market. The region also faced a cost-of-living crisis that affected consumer purchasing power and demand for energy-related products. However, in April, the price of Polypropylene in the Belgium market increased by around 1% as the price of upstream crude oil rose by approximately 3.75% in April 2023.
The Saudi Arabian Polypropylene market experienced a bearish trend throughout Q2 2023, with prices decreasing by approximately 1.5%, 1%, and 7% in April, May, and June, respectively. This decline was influenced by the fall in feedstock Propylene prices, which dropped by about 1.5%, 8%, and 6% in the same months, impacting the overall feedstock cost. Saudi Aramco's decision to cut propane prices in June had a cascading effect on the downstream derivative industries, including the Polypropylene market. Additionally, the Middle East faced ample supplies and low demand from China's petrochemicals industry, adding further pressure on market sentiment. The optimism surrounding demand growth faltered as oil prices remained under pressure despite Saudi Arabia's surprise output cut. Concerns over a weak global economic outlook and increased Russian oil flows and US production also contributed to bearish market sentiment. By the end of the quarter, the price of Polypropylene Injection Moulding FOB Al Jubail (Saudi Arabia) was hovering around USD 856 per metric ton.
The South American Polypropylene market experienced a bearish trend in the second quarter of 2023, with prices declining in the Brazilian market by approximately 5.3%, 6.8%, and 5.6% in April, May, and June. This drop in prices was attributed to the decrease in feedstock Propylene prices, which fell by around 18%, 14%, and 10% during the quarter. The downturn was driven by lackluster demand from downstream industries, particularly the construction and automobile industries. Cheaper imported cargoes from the United States and Russia impacted the smooth flow of products into Brazil. The country also faced economic challenges, with an increased inflation rate affecting the demand for Polypropylene during this period. High inflation and a slowdown in the manufacturing sector significantly impacted the chemical industry's operations. Manufacturing contracted for the seventh consecutive month, and the Central Bank of Brazil considered further rate hikes to address inflationary pressures. At the end of June 2023, the price of Polypropylene Random Copolymer CFR Santos (Brazil) was hovering around USD 1282 per metric ton.
In the first quarter of 2023, Polypropylene prices experienced an upward trend in the North American region due to strong market sentiments. A decent trading environment was observed due to consistent demand from downstream packaging and textile industries. Meanwhile, the Polymer grade Propylene remained on the higher side amid high WTI crude oil prices, providing cost support to the Polypropylene market. While supplies had tightened, some distributors had material on hand to fulfill the total demand, and the cost-push increases continued to endure. As a result, the prices of Polypropylene for FOB Texas were evaluated at USD 1543/MT for Copolymer Injection Grade and USD 1433/MT for Homopolymer Injection Grade on March 31.
During the first quarter of 2023, Polypropylene prices in the Asia-Pacific region showed a mixed trend. Despite rising Propylene prices, the Polypropylene market in China had a bearish start to the quarter due to a lack of demand in the domestic market ahead of the Lunar New Year holiday. Prices rose after the break as market players replenished available material due to a minor rebound in demand from downstream textile and packaging businesses. With robust operating rates and a constant flow of imports from other Asian nations like South Korea and Singapore at Chinese ports, inventory levels in the domestic market remained high. Towards the end of the quarter, several Polypropylene suppliers were willing to destock their large inventory, due to which they decided to trim the prices. Therefore, the prices for Raffia grade EXW Dalian and Random Copolymer CFR Shanghai settled at USD 1130/MT and USD 1360/MT on March 31.
Polypropylene prices showed fluctuation in the European region during the first quarter of 2023. In the first two months of Q2, the overall prices of Polypropylene in the German market took an unprecedented decline due to declining demand from the downstream industries. In terms of supply, inventories were relatively adequate due to high operating rates and the continuous flow of imports from the overseas market. Despite this, market participants reported few instances of new orders from packaging industries. However, Polypropylene prices started to follow an increasing trajectory in the final month of Q2 because market sentiment had slightly improved. In addition, operating rates remained stable in the domestic market owing to high consumption from downstream industries. Therefore, the price of Polypropylene for FD Hamburg reached USD 1700/MT for Copolymer Grade on March 31.