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Commodity markets affected by European automotive industry challenges

Since mid-March, commodity markets have been significantly affected by the challenges faced by the European automotive industry during the coronavirus pandemic.

Despite countries starting to soften lockdown measures, the recovery in the European automotive-related and transport fuel segments is expected to be slow and gradual.

The following are the latest key facts:

Infrastructure and trade flows:
–The partial reopening of the Turkish-Iranian border is allowing some Iranian polymers to be imported via truck. The border closure had seen polymers transported via rail, causing delays and increased costs

–State-by-state lockdown measures in Nigeria are causing challenges for transportation of polymers, with consumers in the coronavirus-hit north of the country struggling to receive material

–Falling freight rates have allowed for increased flexibility in butadiene export pricing targeting Asia

–Despite refinery run cuts across Europe, gasoline stocks remain high, rising 13% during the previous week. A steepening contango favors storing volumes in-tank

Demand:
–Demand for polypropylene from the key automotive sector remains muted in May despite automobile plants restarting operations across Europe.

–Trading activity of gasoline blending components such us MTBE and ETBE driven by a steep contango structure and storage economics, rather than blending economics, due to reduced transportation fuel demand

–The phthalatic anhydride market has been improving since lockdowns eased, but concerns from a lack of automotive demand remains

–Car makers in Germany are heard to be operating at reduced rates due to a lack of new car purchases, even for previously popular models

–Gasoline markets have retreated, after rallying during the past two weeks as a slow easing of lockdown measures points to a slower recovery in demand

Prices:
Petrochemicals

–European toluene TDI FOB ARA is down 7.50% week on week, following weakening Eurobob gasoline prices

–Platts MTBE FOB ARA is down by around 4.80% since Monday, but above toluene TDI FOB ARA

–As the cargo and barge markets weaken, the gasoline crack spread has eased back from Monday’s four-week high of $2.60/b, indicating a return to bearish market sentiment

–Weak demand for oil and petrochemical feedstock markets in the Mediterranean has seen Platts assessment for Med-Med MR vessels fall from record highs to an eight-month low of Worldscale 105 on Wednesday.
Source: Platts

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