Supply balances across the European petrochemical markets in the week of July 19 remain dominated by logistics challenges for both imported and domestic material.
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Following the mass flooding seen in parts of Germany and Belgium, participants in some markets are voicing fears that disruption along the Rhine river will put additional pressure on already tight truck availability in the intra-Amsterdam-Rotterdam-Antwerp region if barge and railcar transportation is hampered, with potential for truck costs to skyrocket.
Sources in markets without Rhine dependencies enter the week pointing to fewer trucks on the road due to cross-border quarantine regimes and driver summer holidays.
European naphtha market participants are closely tracking supply tightness in the week of July 19, while demand from both petrochemical producers and gasoline blenders will continue to support the complex. Petrochemical producers will likely start seeking to cover their August feedstock shorts, amid unusually high naphtha utilization rates for the season and limited LPG availability.
Activity in Europe's methanol barge market has shifted to August, as tight supply conditions combined with logistics concerns along the Rhine has prompted buyers to seek greater supply security. In the week ahead, market sources will be monitoring further changes in Rhine water levels and weighing the spot price impact of any resulting transit disruption.
Olefins and polymers
In European ethylene, the arbitrage from the US to Europe has shut which could bring tighter conditions for the European market over coming weeks. Derivatives markets in the chain are, meanwhile, eyeing increasingly challenging logistics.
Mono-ethylene glycol, or MEG, truck buyers are expected to return to the market as delays in vessel arrivals limit imports from other regions. MEG spot prices for truck deliveries traded higher in the week to July 16 as vessel delays saw buyers scramble for trucks, sending offers higher amid more balanced supply.
The European polyethylene market outlook is similarly logistics-focused, with softer conditions noted in recent weeks but concern that logistical delays, both by truck and ship, could bring artificially tighter market conditions.
Global import flows are also contributing to mixed sentiment in European PVC. Logistical constraints have prevented arbs from fully opening up with local European consumers sticking to contractual volumes while global supply flows continue to improve with steep spot price decreases seen in Turkey, Asia and the US.
In polypropylene, imported material is helping to improve homo injection grade supply but concerns remain over copolymer availability ahead of the summer holiday period and traditional production slowdown.
In styrenics, the acrylonitrile-butadiene-styrene market remains tight despite weaker demand from the automotive sector in early July. Market participants have little expectation of a short-term improvement in availability, as freight rates remain a barrier to importers.
Styrene-butadiene-rubber players are also likely to face ongoing logistical challenges in the week of July 19, with a shortage of truck drivers noted in the US and Europe and European spot prices at a new four-year high. The European market is expected to be seasonally quieter over the summer period, which players hope could give the market time to return back to normality.
Demand for recycled polyolefins is expected to remain firm through the week as expectations of an easing due to the summer break appear so far unfounded. Further downward pressure on the equivalent virgin markets has yet to deter recycled buyers and sources expect this to continue through the week.
The recycled-PET market will be weighing up the effect of potential summer slowdowns as recyclers hope some reduction of demand may afford the opportunity to regain some supply balance amid the expectation that bottle bales supply will also begin to increase following warmer weather.
Methyl tertiary-butyl ether, or MTBE, market participants will be on the lookout for any uptick in blending activity as gasoline demand continues to increase in both Northwest Europe and the Mediterranean. Premium unleaded Mediterranean gasoline prices flipped from a discount to a premium over their Northwest European counterparts in the week to July 16, with MTBE likely to see more demand in the Mediterranean as a result.
Market focus in toluene is likely to remain focused on any shift in arbitrage economics between Europe and the US, as bullish gasoline markets in both regions pull components into blending operations.
The European xylenes market is, meanwhile, expected to take its cues from toluene and gasoline demand this week as emergence from lockdown in parts of Europe coincides with the holiday season.