What causes polypropylene prices to rise in Europe but not in the US and Asia

In a continuation of the stable trend observed over the past three weeks, the US Polypropylene (PP) market has maintained unwavering stability, with prices remaining unchanged during the last week of February 2024, said Chemanalyst.

This trend is particularly evident in the PP Copolymer Grade DEL Houston segment, emphasizing a sustained period of equilibrium and pricing steadiness. The average price for this grade over the week was recorded at USD 1106/MT, indicating a balanced market where the interplay of supply and demand has led to minimal fluctuations in Polypropylene prices.

Contrary to the global stability, the European region experienced a notable 3% increase in PP prices this week. The driving force behind this upward trend was the adjustment in production costs, notably the rise in the price of feedstock Propylene by approximately 2% since the commencement of the new year. Despite stable demand within the region, the supply remained categorized as low to moderate. The effects of the Red Sea crisis diminished during this period, yet a scarcity of the product persisted, leading to an average price of USD 1310/MT for PP Injection Moulding FD Hamburg over the week.

In the Chinese market, even though Chinese industry participants have not fully resumed their work routines following an extended holiday, the PP markets have officially reopened, showcasing new cost-driven price increases domestically. Elevated energy prices provide a solid cost foundation, enabling sellers to increase their offers compared to the pre-holiday period. Simultaneously, the trading atmosphere remains cautious due to a slower-than-anticipated demand recovery and prevailing supply pressures domestically, adding pressure to market sentiment and constraining potential PP price increases.

Despite the stable trend in the Asian PP market, a notable 1% increase in PP prices were observed in the Singapore market as traders strategically adjusted prices to optimize margins, responding to the steady pricing observed over the last three weeks. The decreasing impact of the Red Sea crisis on freight rates across the Asian trade route has created a good trading atmosphere further led to improved demand from overseas markets, contributing to this upward trend. The average price for PP Block Copolymer CFR Jurong settled at USD 980/MT over the week.

As per ChemAnalyst's analysis, the price of PP is anticipated to either decrease or remain stable in the initial half of March 2024. This expectation is based on the improvement in product supply following the resolution of the Red Sea crisis, coupled with a decline in global freight costs. The demand for the product is expected to maintain stability in the upcoming weeks, with the price trend of PP continuing to be influenced by supply chain dynamics.

We remind, Sinopec Yangzi Petrochemical, a subsidiary of the globally renowned energy and chemical giant Sinopec, recently marked a significant development in its operations. On February 19, the company successfully resumed production at the No. 2 polypropylene (PP) production plant located in Nanjing, China, following a scheduled maintenance period. The maintenance activities, which commenced on January 30, were focused on enhancing the efficiency and reliability of the production line with an annual capacity of 80 thousand tons of polypropylene.

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Epsilyte, a prominent manufacturer of Expandable Polystyrene (EPS) in North America, has recently disclosed its decision to modify the previously announced price increase for all grades of EPS, said the company.

The initial plan was to implement a $0.05/lb. hike, but the company has now revised it to an increase of $0.07/lb. This adjustment is scheduled to take effect from March 1, 2024, or as contracts permit.

In addition to this revision, Epsilyte is set to enforce another price increase for all grades of EPS, amounting to $0.05/lb. This subsequent adjustment is slated to be effective from March 15, 2024, or as contracts permit.

These alterations in pricing strategy are deemed necessary by Epsilyte due to the rapidly changing dynamics of feedstock costs. The unexpected pace of evolution in these costs is attributed to ongoing unplanned events that have significantly impacted the industry's operational landscape.

The decision to modify the previously communicated price increase reflects the company's commitment to adapt to the prevailing market conditions. The unpredictable nature of feedstock costs has necessitated a more immediate response from Epsilyte, prompting the adjustment to the planned price hike.

The revised increase of $0.07/lb. for all grades of EPS from March 1, 2024, aims to better align with the current feedstock cost dynamics. By staying attuned to the evolving market conditions, Epsilyte aims to ensure a fair and sustainable pricing structure that considers the challenges posed by unforeseen events impacting the supply chain.

Furthermore, the additional price hike of $0.05/lb. from March 15, 2024, underscores the company's commitment to addressing the challenges posed by the swiftly changing feedstock cost landscape. These adjustments are not only responsive but also proactive, allowing Epsilyte to navigate the uncertainties posed by unplanned events that have exerted pressure on the cost structure of feedstock.

Epsilyte acknowledges the significance of effective communication with its stakeholders, including customers and partners. Therefore, the company is committed to working closely with its clients to ensure a smooth transition during these price adjustments. The goal is to minimize any potential disruptions to existing contracts while facilitating transparency and understanding regarding the market-driven need for these changes.

The decision-making process behind these adjustments involves a comprehensive analysis of the feedstock cost dynamics, considering factors such as market trends, supply chain disruptions, and the impact of unforeseen events. Epsilyte recognizes the importance of maintaining a competitive edge in the market while balancing the need for a sustainable business model in the face of evolving challenges.

We remind, Epsilyte, The Woodlands, Texas, has partnered with Italy-based equipment provider Fimic SRL to broaden its expanded polystyrene (EPS) recycling operations, said the company. Epsilyte says it will leverage Fimic’s melt filtration equipment to address physical contamination in recycled EPS. The company says Fimic’s technology demonstrates versatility in its ability to handle different types of physical contamination and minimizes the risk of damage to recycling equipment. Epsilyte also cites Fimic’s reliable delivery schedule as a factor in its partnership decision.

As Epsilyte implements these price adjustments, it aims to provide its customers with a clear understanding of the rationale behind the changes. The company remains committed to delivering high-quality EPS products and services while navigating the complex and dynamic landscape of feedstock costs.
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Liaocheng Meiwu New Materials Technology, a prominent player in China's petrochemical industry, has implemented an unscheduled shutdown of production at its methanol-to-methanol olefin-to-methanol plant located in Liaocheng, Shandong Province, China, said Chemanalyst.

The facility, with a substantial capacity of 120 thousand tons of ethylene and 180 thousand tons of propylene per year, is undergoing maintenance activities that commenced in early February. The maintenance period is anticipated to span 30 to 45 days, emphasizing the company's commitment to ensuring the optimal functioning of its production infrastructure.

This temporary hiatus in production aligns with Liaocheng Meiwu New Materials' dedication to maintaining operational efficiency and product quality. Unscheduled repairs, although disruptive, are crucial for preventing potential issues and enhancing the longevity of the production facility. The meticulous approach to maintenance underscores the company's commitment to adhering to the highest industry standards.

It is noteworthy that the olefin plant in Liaocheng, where the maintenance activities are currently underway, initiated test production on November 28, 2019. The facility's strategic location in Shandong Province, a vital industrial region in China, positions it to cater to the needs of consumers within the province. Liaocheng Meiwu New Materials Technology specifically targets end users in Shandong Province, including those who import the produced ethylene and propylene. Notably, the company does not possess its own processing facilities, relying on the sale of these key materials to meet the demand in the region.

Ethylene and propylene, the primary outputs of the olefin plant, serve as crucial raw materials in the production of polyethylene (PE) and polypropylene (PP), respectively. The temporary suspension of production at the Liaocheng plant impacts the supply chain of these essential materials, prompting a strategic approach to address maintenance needs while mitigating potential disruptions in the market.

Liaocheng Meiwu New Materials Technology Co Ltd has established itself as a major player in China's petrochemical landscape, focusing on the production of ethylene and propylene. The company's existing olefin production plant, boasting a significant capacity of 300,000 tonnes per year, employs Wison Clean Energy's technology to convert methanol into olefins. This technological approach aligns with the industry's commitment to cleaner and more sustainable production processes.

The decision to undertake maintenance activities at the methanol-to-methanol olefin-to-methanol plant signifies Liaocheng Meiwu New Materials' proactive stance in ensuring the reliability and efficiency of its operations. The company's commitment to delivering high-quality raw materials underscores its responsibility as a key contributor to China's petrochemical sector.

The ongoing maintenance period is not just a measure to address immediate concerns but also a strategic investment in the long-term sustainability of Liaocheng Meiwu New Materials' operations. By taking a brief pause in production to conduct necessary repairs, the company aims to enhance the resilience of its facilities, thereby contributing to consistent and reliable outputs in the future.

We remind, Axens’ designed 3.2-MMtpy ebullated-bed residue hydrocracking (H-Oil®) unit, 3.5-MMtpy distillates hydrocracking (HyKTM) unit and naphtha hydrotreating (NHT) unit were successfully started at Shenghong Refining & Chemical (Lianyungang) Co. Ltd’s crude to paraxylene complex in China’s province of Jiangsu. These single train units aim at maximizing naphtha production as well as improve the coker’s feed quality while processing steam cracker pyoil, diesel, vacuum gas oil, coker gas oil and vacuum residue as feedstocks within this integrated complex.

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Sabic expects petrochemical markets to again be “challenging” in 2024 amid slow demand and a lack of significant economic recovery in China, with the company also looking to address the competitiveness of its European assets, according to CEO Abdulrahman al-Fageeh.

“There remains considerable uncertainty heading into the first quarter of 2024,” he said in a presentation on Feb. 27. “Sabic has undertaken a comprehensive portfolio review and identified the pathway to sustained value creation,” he said.

Al-Fageeh said the review would optimize its internal resources to “enhance its core focus on petrochemicals. Additionally, we are pursuing a number of initiatives to address the competitiveness of our European assets.” The company is “ultimately striving for a maintainable and modernized footprint in the region,” he said. No further details were given regarding which assets in Europe are being reviewed.

In January, Sabic implemented the permanent closure of one of its two polycarbonate (PC) production lines at Cartagena, Spain. The LX2 PC production line was shut down on Dec. 31 after the closure was first announced in October. The resins line had been idle since October 2022 due to difficult market conditions and was “no longer sustainable,” it said at the time. In November, Sabic recorded an impairment charge of 255 million Saudi riyals ($68 million) in its fiscal accounts for the third quarter of 2023 as part of the restructuring program in Europe.

The portfolio review also includes its previously announced divestment of subsidiary Saudi Iron & Steel Co. (Hadeed), which is proceeding as planned, he said.

Sabic said in an outlook that it anticipates capital expenditure in the range of $4 billion-$5 billion in 2024. In the first nine months of 2023, capex was about $2.8 billion. It did not provide a figure for 2023 capex.

In January, the company announced the final investment decision to go ahead with its $6.4 billion petrochemical complex at Gulei, Fujian Province, China, with partner Fujian Energy and Petrochemical Group. The project will have a mixed-feed steam cracker with a production capacity of up to 1.8 million metric tons per year of ethylene, along with ethylene glycol, polyethylene, polypropylene and PC.

Sabic posted a fourth-quarter net loss from continuing operations, excluding Hadeed, of 1.48 billion riyals, swinging from a profit of 540 million riyals in the third quarter and 350 million riyals in the prior-year period. EBITDA of 3.33 billion riyals fell 41% sequentially on 3% lower sales volumes, with its EBITDA margin of 10% down from 16%. The average sales price rose by 1% sequentially. Sales of 35.03 billion riyals declined 3% sequentially and 11% year over year.

For the full year 2023, Sabic’s sales declined 23% year over year to 141.54 billion riyals, and net earnings from continuing operations plunged to 1.3 billion riyals from 15.8 billion riyals in 2022. Including Hadeed, Sabic swung to a net loss of 2.77 billion riyals from a profit of 16.53 billion riyals. The company’s average selling prices and volumes on a year-on-year basis in 2023 dropped by 21% and 2%, respectively. The EBITDA margin fell to 13% from 20% a year earlier. Nonrecurring items of 3.47 billion riyals were the “result of impairment charges and write-offs of certain capital and financial assets, as well as provisions for the restructuring program in Europe and constructive obligations,” it said.

While petrochemical makers are expanding their production capacities, including Sabic, demand for most petrochemicals is “still low,” al-Fageeh said. “The petrochemical industry navigates a challenging operating environment — underwhelming demand within our target markets led to lower year end product prices and there remains considerable uncertainty heading into the first quarter of 2024,” he said.

Sabic’s fourth-quarter petrochemical sales fell 4% sequentially to 32.14 billion riyals, driven primarily by lower sales volumes, it said. EBITDA of 2.12 billion riyals declined 52%. Global methyl tert-butyl ether prices decreased by 18%, burdened by lower gasoline prices and weak seasonality, it said. Ethylene glycol prices, however, rose 3% sequentially due to extended and unplanned shutdowns. Global polyethylene and polypropylene prices increased slightly, by 1%, with support from higher resin and gas pricing, it said. Average PC prices declined by 4% sequentially due to lower global demand.

We remind, Saudi Basic Industries Corp. (SABIC), a prominent entity listed on the Saudi stock exchange, is gearing up to make a bid to acquire a stake in Braskem, a leading petrochemical company headquartered in Brazil. It is worth noting that SABIC is predominantly owned by Saudi Aramco, holding a significant 70% stake in its ownership. Contrary to previous speculations, SABIC plans to pursue an independent bid for the stake in Braskem and will not engage in a partnership with the Abu Dhabi National Oil Co. (ADNOC) from the United Arab Emirates (UAE) for this endeavor. Reports indicate that ADNOC has already initiated the due diligence process in connection with this potential transaction.

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Aramco, a prominent player in the global energy and chemicals landscape, has taken a significant stride towards advancing its strategic localization initiatives by finalizing a series of 40 corporate procurement agreements valued at a staggering $6 billion with suppliers operating within the Kingdom of Saudi Arabia, said Chemanalyst.

These agreements signify a monumental leap towards reinforcing Aramco's domestic supply chain ecosystem, a pivotal component in bolstering the company's resilience, dependability, and agility to effectively cater to the dynamic demands of its customer base. Furthermore, these arrangements provide suppliers with invaluable long-term visibility into demand patterns, empowering them to capitalize on forthcoming growth prospects and spearhead localization endeavors.

Moreover, these agreements seamlessly align with the overarching objectives of Saudi Aramco's iktva program, a cornerstone initiative aimed at nurturing a vibrant economic landscape and fostering fresh avenues for Saudi nationals. The recent conclusion of 40 such agreements is anticipated to inject vigor into the domestic value chain, thereby amplifying the ecosystem that Aramco is actively nurturing. This strategic maneuver catapults us towards a more prosperous, diversified, and resilient supply chain, pivotal for ensuring uninterrupted business operations. Additionally, these accords signify a significant milestone in our ongoing iktva journey, providing our partners with a gateway to harness opportunities in an increasingly dynamic and diversified operational milieu.

Spanning across a myriad of sectors, the recently sealed corporate procurement agreements encompass a diverse spectrum of product categories, including indispensable commodities such as instrumentation, electrical equipment, and drilling equipment. Furthermore, Aramco has entered into two strategic Memoranda of Understanding with key partners, aimed at fostering collaboration in localization efforts and driving the development of the supply chain ecosystem.

These initiatives underscore Saudi Aramco's steadfast commitment to bolstering the domestic economy, enhancing the capabilities of local suppliers, and fostering sustainable growth within the Kingdom of Saudi Arabia. Through these strategic alliances and localization endeavors, Saudi Aramco continues to play an instrumental role in steering economic diversification and creating opportunities for the nation's workforce.

Saudi Aramco, officially known as the Saudi Arabian Oil Group or Aramco (previously Arabian-American Oil Company), stands as a state-owned entity specializing in petroleum and natural gas. It serves as the national oil company of Saudi Arabia. Renowned for its vast reserves, Saudi Aramco boasts the world's second-largest proven crude oil reserves, exceeding 270 billion barrels (43 billion cubic meters). Additionally, it holds the distinction of having the highest daily oil production among all oil-producing companies.

We remind, Saudi Arabia's government ordered state oil company Aramco to halt its oil expansion plan and to target a maximum sustained production capacity of 12 MM bpd, 1 MM bpd below a target announced in 2020. Saudi Arabia for decades has been the main holder of the world's only significant spare oil capacity, providing a safety cushion for global supplies in case of major disruptions caused by conflict or natural disasters. In recent years, fellow member of the Organization of the Petroleum Exporting Countries the United Arab Emirates has also built-up spare capacity.

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