Market Fundamentals Drive Polyolefin Price Premiums over Feedstock?
Whilst few people were surprised by the increase in C2 and C3 pricing largely reflecting the increase in crude oil price (see table below), the triple digit increase in PP and PE pricing was a shock.
And were in not for the continuing desperation to secure sufficient volumes, the scale of these increases would no doubt have met with greater consternation. The graphs on the right clearly indicate the decreasing relationship between both PE and PP and their respective feedstocks.
Such is the demand from converters that some producers have asked for a further increase in May for PE, apparently based upon the price that some converters are willing to pay in order to secure sufficient material. Where we go from here remains to be seen, but material remains in desperately short supply.
Even as the supply situation starts to improve there will be a strong desire throughout the supply chain to ensure that ‘healthy’ levels of inventory are in place, thus increasing the likelihood of the present situation persisting longer.
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