The European polyether polyol market has been facing noticeable supply chain pressure in recent months. Major European suppliers like Repsol and Dow are operating at low rates with reduced production levels, resulting in a relatively tight supply in the market. From February to March 2025, polyether polyol prices have surged by EUR 100/tonne due to the supply shortage. With a further widening supply gap and increased imports from China, European polyether polyol prices are anticipated to keep rising from March to April.
Additionally, there is a relatively small number of local traders in Europe, mainly due to the following reasons:
- Limited profit margins: Profits for polyols are relatively low, making large-scale trading markets unsustainable.
- High transport costs: Traders in Europe are feeling the strain of significant cost pressures.
In contrast, there are more traders in the Middle East and Africa regions, particularly in the African market, where large traders are not uncommon. Therefore, the focus of global polyether polyol trade is gradually shifting.
Shell’s Strategic Adjustment of Chemical Assets
Shell is considering selling its chemical assets in Europe and the U.S., with Morgan Stanley conducting a strategic review, according to a report from the Wall Street Journal. This move reflects the dual challenges facing the chemical industry. Uncertainty in regional markets: Shell owns multiple chemical complexes in Europe and the U.S., such as Rheinland in Germany, Moerdijk in the Netherlands, Mossmorran in the UK, Deer Park in Texas, Geismar and Norco in Louisiana, and Monaca in Pennsylvania. The operation of these facilities is affected by global market fluctuations and regional supply-demand dynamics. Particularly in Europe, amid the tight supply and continuous price increases of polyether polyols, the operational efficiency and profit margins of these assets are under severe tests. Margin pressure and strategic restructuring: Shell’s chemical business has been continuously incurring losses over the past three years, although the losses shrank in 2024 (reducing from USD 717 million to USD 392 million). As the European chemical industry faces significant pressure, strategic reviews and potential asset divestments have become important means for Shell to optimize resource allocation and reduce risks. Potential buyers include private equity and Middle Eastern companies who seek to expand capacity in the West. It reflects not only the market attention on chemical assets but also indicates potential shifts in the global chemical industry in the future.
Market Restructuring: Changes in Supply Chain Flows and Global Trade Patterns
By linking the current situation in the European polyether polyol market with Shell’s strategic adjustments, several underlying trends can be observed.
Supply Tightness Driving Price Increases
European producers are challenging to meet market demands due to the fragmented and relatively inefficient production models. Although Chinese products fill the supply gap, they also exacerbate the regional supply-demand imbalance. Consequently, price hikes become an inevitable trend. The continuously rising prices also prompt local producers to reevaluate their asset allocations and production strategies.
Cross-Regional Trade and Capital Restructuring
Global chemical giants like Shell are responding to losses and risks through strategic reviews and asset sales. In the future, if more companies choose to divest assets in Europe, it could lead to a round of capital restructuring and portfolio rebalancing.
Reallocation in the Global Supply Chain
With industry leaders like Shell increasing their investments in China and Singapore, the global polyol supply chain is gradually shifting its focus from Europe and the U.S. towards Asia. This trend not only underscores the reallocation of cost and production advantages but also is poised to have far-reaching implications on the future global trade landscape. Transport costs and trade barriers remain crucial variables in the polyether polyol market, potentially leading to more cross-regional collaborations and M&A restructuring in the future.
