German election uncertainty drives mixed European chemical market sentiment

On Feb. 20, market participants in the European chemical sector expressed mixed perspectives about the potential implications of the upcoming German election scheduled for Feb. 23.

Speculation on the election result is exacerbating already weak chemical sentiment across both domestic German and wider European markets. The outcome is likely to have significant implications for the country and the Continent's struggling chemicals industry.

In the current market conditions, uncertainty has intensified the persistent negativity that has plagued the country's chemical industry over the past two years.

In the markets for materials like polybutylene terephthalate, participants have attributed rising prices to the election pressure, which has heightened buyer uncertainty and driven prices up amid restocking activities.

Platts, part of S&P Global Commodity Insights, assessed the spot European PBT price at Eur1,650/mt DDP Germany Feb. 19, up Eur75/mt from Jan. 1.

Looking longer term, the outcome of the federal election is expected to be critical in dictating demand across a variety of the country's derivative sectors, with strong implications for domestic construction activity.

Current environmental regulations and construction policies, such as insulation specifications, create high costs and long lead times for building houses in Germany, and there is currently an excess of demand for affordable housing, according to a source.

Across the week, polyvinyl chloride market sources cited the need for a positive outcome for construction as key to bolstering demand for the second half of the decade.

"A positive outcome for industry from the German election, it is an absolute necessity. It is not hope, it is a must," a PVC trader said. "The problem is whatever happens on Sunday will take time to improve PVC market conditions."

However, sources anticipated that any positive outcome for construction would take 6-12 months to materialize in the PVC market, creating concern in the short term, no matter the result. PVC buying interest in Germany continues to be slower than elsewhere in Europe.

"Political decisions always take time to come into effect, so we don't expect to see drastic changes until Q3," a German PBT distributor said.

Elsewhere, the elections have weighed on German consumer confidence, and the results could influence the country's automotive industry, which is currently experiencing a downturn, further constraining the buying appetite and demand for various polymer and derivative products.

"Germany is in a critical position with these elections," an acrylonitrile-butadiene-styrene producer said.

However, one European rubber producer shared a slightly more optimistic outlook, noting that a focus on lifting domestic industrial conditions from some political parties' campaigns could bolster the German automotive industry.