Price reports of plastic granulates: The war in Ukraine has not yet affected the polymer market

However, advance purchases are limited, despite the fact that some Central European polymer manufacturers are quite flexible in their prices and also offer an extra bonus for larger quantities. For the time being, most plastics converters, due to unpredictable circumstances, buy only the most necessary, they mostly process their existing stocks. A smaller percentage of converters - mostly film manufacturers - are trying to buy in advance for March. Their purchases are mostly limited by their still high stock levels of finished polymer and plastic products. The high inventory levels are due to the increase in production costs difficult-to-pass on resulting from higher energy and labor costs and weaker-than-expected February sales. Many expect dramatically changed circumstances to help implement price increases for plastic products as early as March. Others expect the fight with their customers to continue to reach profitable prices in the first half of the year.

The price of NAPHTHA has risen further since the beginning of February, with European polymer manufacturers expecting olefin monomer prices to rise by 7-10%. This mean 7,1 % increase in case of ethylene and 7% price increase in the case of propylene monomer price in March. However, converters are not open to accepting such a price increase for polymers. One of the reasons for this is the already mentioned, difficult-to-implement plastic finished product price increases, and another is the fact that overseas PE and PP shipments are still available and can be booked for delivery in April-May at extremely competitive prices. The third reason, though, is that Central European polymer manufacturers still have spot availability of both PE and PP in the last days of February. Probably this expected resistance is the reason why the possibility of publishing contract olefin monomer prices twice in March, early and mid-month, has been raised.

What is expected in the near future? The significant price movements experienced last Thursday have largely subsided, with the market pricing the Russian victory. However, the fighting is not over. Even in the event of protracted fighting, a lasting rise in oil prices on the world market is not expected, and even a temporary drop in oil prices is conceivable based on the experience of 2014. However, increasing market uncertainty and volatility can be taken for granted. Oil prices can only move significantly and permanently if Russia is cut off from the SWIFT system. To the best of our knowledge, the chances of this happening are low, although it could happen in the week ahead. If this were to happen, then the oil and petrochemicals industries connected to the “Friendship” oil pipeline and depending on it in the Czech Republic (to more than 50%), in Poland (60%), in Hungary (73%) and Slovakia (96%) will probably have to curb their production significantly until continuous supply is created from alternative sources. In the Hungarian, Czech and Slovak relations, the recently renovated Adriatic oil pipeline allows for this, and Poland can obtain the required quantity through its own offshore oil terminal (Naftoport). Switching oil supplier resources would certainly take time and disrupt both refineries and petrochemical plants.

What is already being felt: supply will fall in March in regions with a high market share of polymers from Russia and the CIS; mainly in the Baltics and Turkey. And that will mean rising prices in these countries, and price increases will seep into all of Central Europe.

Looking at the near future, we expect several possible scenarios, the main ones being:

According to the first, even in the event of a protracted war, a lasting rise in world oil and NAPHTHA prices is not expected, but in the short term, significant volatility is likely for both oil and NAPHTHA and monomers. However, the volatility of polymers is being held back by persistently weak demand. In the short term until mid-March, this is very likely.

According to the second scenario, the risk of Russian economic ties will increase, so Russian polymer imports will decrease. Thus, in regions where Russian imports play a dominant role, shrinking supply raises prices. This will be accompanied by planned maintenance in Central Europe from April, which will further reduce the supply. All in all, this means a rise in prices. In the second half of March, this scenario is more likely.

The third least likely scenario so far is that the EU will impose harsh financial sanctions on Russia, which could even cut off oil and gas supplies between Central Europe and Russia. This would have a dramatic impact on the polymer and plastics industry in Central Europe and, through it, on all industries. It is even conceivable that monomer and polymer production will cease for a while until the conditions for a continuous supply of crude oil are established.