European Propylene Oxide Prices Surge in February 2024 Amidst Supply Challenges

Hamburg (Germany): Propylene Oxide prices remained elevated in the European markets with prices recovering to FY23 levels YoY basis as supply tightens across Europe and North America. Propylene Oxide prices are anticipated to surge further in early March 2024 based on the current supply dynamics and continuance of supply chain disruptions in global markets due to Red Sea crisis. Supply tightening remained largely in line with the companies like LyondellBasell and INEOS streamlining production and adjusting inventories. Undersupply sentiment prevails in Europe as German markets see strong production cuts partially due to higher input costs and interest rates while other suppliers attest addition of newer capacities in the East.

European data suggests that the Propylene Oxide prices in February surged by $10/mt as assessed on 1st March in Germany FOB basis weekly while the prices remained 5% lower than FY23 prices YoY basis. Further inquiries and data suggests that despite FY23 saw production falls across European markets, prices continued to remain elevated than their peer competitors across the Atlantic and Mediterranean. Cracker trimming and plant shutdowns especially in Netherlands and Germany due to high energy and input prices in FY23 has tightened supply throughout Europe.

Propylene Oxide exports declined significantly of Germany by 20% YoY comparison in FY23. Decline in Propylene Oxide exports was also marked by tightened domestic market and fewer orders from the East due to supply additions and Chinese markets coming online. February 2024 observed weakening of Chinese capacities in Asia due to Lunar New Year festivities with strong growth in spot orders from Thailand, Malaysia and India. Cosmetics and homecare demand in European markets is recovering although lackluster compared to pre-crisis days, while significant compared to FY23.

Upward price movements to remain temporary as overall demand sentiment remained weak with Polyurethane markets remaining subdued currently in Europe primarily due to weak demand fundamentals and high interest rates for producers, asserted one market participant. Europe’s sustainable transition efforts continue to generate stable demand for Propylene Oxide derivatives market although not strong enough to absorb the full Propylene Oxide capacities of EU. Overall production and cost dynamics of Propylene Oxide derivatives reveal that supply disruptions through Mediterranean continue to hurt export markets of Asia from Northern Europe with sufficient orders to improve production.

North American markets face lower supply situation due to plant outages and feedstock shortages as propylene inventories fell to 8-month low, according to US EIA raising concerns temporarily. Although US markets are sufficient to cater for stronger demand, recent outages at LyondellBasell Plant has reduced supply with Propylene Glycol markets observing strong feedstock stocking pressures downstream. Asian importers are currently rushing into Middle Eastern and other Propylene Oxide markets to tap supply as demand is improving compared to FY23. Consumer markets are coming on par with food and cosmetics observing significant gains in Asian markets as winter fizzles out. ChemAnalyst maintains a bullish pricing trend for the next two months in Asian and American Propylene Oxide markets.