BLOG: European PE and PP: Energy cost and demand crisis accelerating as prices edge closer to Chinese levels

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SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson. European polyolefin producers operate in countries with varying degrees of exposure to Russian gas supplies, as the first of two charts in today’s blog post tells us. Germany is the most exposed and also concentrates more than 70% of European polyethylene (PE) capacity.

But all producers in the region are facing demand destruction as a result of this startling statistic from the September 8 issue of The Economist: “Gas prices in Europe are around $400 a barrel of oil.”

Annual spending on electricity and gas by EU consumers and businesses could reach €1.4 billion a year from €200 billion previously, The Economist added, citing Morgan Stanley.

Today’s blog details the destruction of European demand caused by soaring energy costs.

And don’t say we didn’t warn you! The blog details the lower price premiums of PE and PP in Europe compared to China, as we said. European prices moved closer to Chinese levels rather than the other way around.

These are very difficult times for the global chemical industry in general. Here’s what to do:

Focus more closely on data points from all regions to assess macro and micro movements. There will be many micro peaks and troughs before things, in a few years, bottom out.

Every tonne you don’t produce because demand doesn’t exist or margins are too thin will be crucial to maintaining revenue, as will every tonne you produce because you’ve assessed that a viable market exists.

Editor’s Note: This blog post is an opinion piece. The opinions expressed are those of the author and do not necessarily represent those of CIHI.

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