Why are polymer prices up so much more than the cost of raw materials?
It’s a reasonable question to ask… why, when monomers such as Propylene have risen by €500 / MT over the last 2 months have we seen the price of Polypropylene rise by double that?
The simple answer is survival.
European based Petrochemical Producers have been loss making for some years, in the chart below, we have plotted the difference from Polypropylene pricing taken from a price reporting agency, and the difference to the cost of the Propylene monomer.
Watch Ian's April update on how the Iran War is affecting polymer pricing:
There are two numbers, one shows the difference to the contract price for C3, the other, a typical spot price for C3. Typically, spot C3 sells at a discount to contract but with the crisis in the Middle East, it is now at a premium. This means that producers will be unwilling to make additional material, unless they can command strong pricing.
Whilst there is no clear number, the industry wisdom is that it costs around €250-300 / MT to convert monomers into polymers for standard polymers such as PP and PE. The material must be packaged and then shipped, and the producer also has to make a profit. As can be seen from the chart, making PE and PP in Europe over the last few years has been severely in the red.
The disruption throughout the supply chain of producing polymers is expected to last for some time. Whilst raw material costs are high and availability is restricted, we can expect to see these prices persisting.
