However, concerns have started to emerge as to whether the market can absorb these steep increases, which were mainly fueled by prebuying, while underlying demand continues to be held back by macroeconomic uncertainty, the sources added.
Spot prices for low density polyethylene reached Eur1,412.50/mt FD NWE on August 31, up Eur140.50/mt on the month, while contract prices ended the month at Eur1,402.50/mt FD NWE, up Eur190/mt.
Spot prices for homo injection polypropylene surged past the Eur1,300/mt FD NWE level on 28 August and settled at Eur1,312.50/mt on August 31, the highest since May 1, Platts data showed. They came off from a low of Eur1,032.50/mt in early July, when the decline in the broader energy complex triggered restocking down the chain.
Contract prices, meanwhile, jumped Eur155/mt on the month to Eur1,332.50/mt FD NWE.
Upstream, September contract prices for ethylene and propylene rose Eur125/mt and Eur105/mt to Eur1,300/mt FD NWE and Eur1,160/mt FD NWE from August, respectively. This came after Eur140/mt and Eur120/mt monthly increases in August, propelled mainly by firmer feedstock naphtha prices.
European PE and PP producers have said they are committed to passing through the full monomer increase in their September contract prices as a way of reviving poor margins.
Targets for September increases for PE producers were heard at Eur175-250/mt. PP producers were aggressive in their September contract pricing policy, and said they were mostly targeting a Eur30-50/mt premium over the propylene CP increase of Eur105/mt.
Converters were bracing for another price jump in September, which they considered to be unavoidable given the sharp rise in feedstock cost. However they said they have started to worry about demand as fundamental challenges to the downstream market persist.
They said that the unusually healthy demand in August, which is a seasonally slow month for polymers, was driven mainly by prebuying rather than an improvement in underlying demand.
"GDP growth in most countries where we supply is stagnant reflected in the volume growth in our product," a food packaging converter said.
"Underlying demand is still weak," a source said, noting that the market could "flatten out" in Q4 without any fundamental support.
SUPPLY CONSTRAINTS
Unplanned and planned plant shutdowns have been exerting upward pressure on PE prices.
The August-September period will see four crackers out for maintenance: the naphthachimie cracker at Lavera, France; LyondellBasell's 735,000 mt/year Wesseling cracker; Borealis' 390,000 mt/year Porvoo cracker; and Shell/Exxon's Fife 800,000 mt/year cracker.
Along with this, unplanned production issues have been heard at Borealis' Stenungsund LDPE plant in Sweden, Total's Antwerp, Belgium HDPE plant and LyondellBasell's Plock, Poland HDPE plant.
PE producers added that they had no incentive to run flat out amid energy price volatility, which was adding to tightness in supply.
PP SPOT BUYING STARTS TO EASE
Spot buying in the PP market has started to ease, owing to the continuing macroeconomic fears and the significant rise in prices, traders said.
"Homo injection grade at Eur1,300/mt is too much," a trader said, adding that buying interest has cooled following the robust trading in H2 July and H1 August.
Another trader said a further increase in PP spot prices, brought about by the September propylene CP hike, could face "huge resistance" from consumers.
"September will be a tough month. There is no visibility [for the PP market] for the time being. The economy is not in good shape, and converters are complaining that they cannot pass through the price increases to their own customers," he said.
A third trader said there were concerns that most converters could already have their fill in August and could possibly "sit out" September to wait for a potential correction in October.
