FocusEurope PP buyers face more price pressure

Borealis had already announced a €50/tonne increase and other producers were following suit. Major producer Basell made it clear that it would be seeking a €60/tonne hike for PP for July and August.

Several buyers expressed frustration.

“They have got their €28/tonne from Q3 propylene,” said a major buyer, “they are just taking advantage of us. This is a joke.” Third-quarter propylene increased by €28/tonne to €878/tonne FD NWE and PP producers had already managed to recover this in July.

“Product is not just tight, it is beyond tight,” a major PP producer said on Tuesday. “We are reducing supplies into August to allow us to build up some stock for September, which is normally a very strong month.

“If buyers can buy material elsewhere, then that will help us. We simply cannot supply all the current demand.”

Some buyers conceded that they had experienced difficulties getting hold of the volumes they needed. Several converters in southern Europe also confirmed that they would be running throughout the summer, instead of closing for holidays.

Others had taken advantage of offers from non-European sources. Some PP was offered from the Middle East, at prices below those offered by European producers.

“We have been able to buy significant quantities at well below €1,200/tonne FD NWE,” said another buyer.

Another major producer said that it would help them if buyers bought product from outside Europe.

“We are so tight that we are on the limit of force majeure,” he said. “I can only encourage them to go to Oman, Saudi Arabia and China to buy.”

Asian prices were also increasing, however, and the market was strong. Homopolymer injection PP was trading at $1,360-1,380/tonne CFR (cost and freight), and the shortage of container availability and high freight rates meant that offers from Asia would be limited.

Product in Europe was tight due to a combination of factors. Earlier plant problems, the permanent closure of two PP plants in Europe in the second quarter and unusually strong demand - buoyed by a thriving European economy - had led to a healthy market.

Basell brought PP production to a halt, as planned, at its 240,000 tonne/year PP unit at Pernis in the Netherlands during the last week of June and INEOS Polyolefins also closed its 200,000 tonne/year Geel, Belgium PP1 homopolymer unit during the second quarter. Both plants ran on old technology.

Total Petrochemicals held force majeure in place on PP volumes in Europe due to earlier production problems at its Feluy site in Belgium and its Gonfreville plant in France, a company source confirmed on Tuesday.

PP production was running normally at these sites on Tuesday but restrictions were still in place due to the company’s tight availability situation.

The next new production due on stream in Europe was from Borealis’s 330,000 tonne/year plant in Burghausen in Germany. The company was on schedule to start up its new unit in November this year.

New production in the Middle East was not expected to affect the European PP market before the end of 2009 at the earliest.

($1 = €0.72)

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