Europe PP rolls over into Feb as buyers see peak

12 February 2008 12:20  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS news)--Europe polypropylene (PP) buyers are reporting increasing offers of PP at rollover levels of the mid-€1,200s/tonne in February on good availability, new capacity, weaker upstream propylene (C3) and less demand, market sources said on Tuesday.

“All the talk about increasing prices this month has disappeared,” one PP buyer said. “I thought we would be under more pressure to accept increases as producers haven’t covered propylene, but the mood has changed.

The moves follow earlier producer targets to lift prices in line with the full €57/tonne ($83/tonne) hike in first-quarter C3.

“My suppliers who had said I would have to accept another increase have just settled at a rollover,” said another buyer who had just settled its February business with two western European producers.

January PP prices rose €30/tonne to around €1,200s/tonne FD (free delivered) NWE (northwest Europe) for homopolymer PP as the month got off to a buoyant start, but later eased as demand fell back.

PP was clearly available in Europe in February, and most plants were running normally in Europe.

The imminent start-up of some PP plants in the Middle East, coupled with Borealis’s new 330,000 tonne/year PP unit in Burghausen in Germany, also added to the more muted mood in the European PP market.

Traders offered material at discounted prices, and there were indications this week that spot prices were slipping. Prices that had been reported in the high €1,100s/tonne FD NWE, were now slipping down to €1,140/tonne FD NWE, according to buyers.

“We need a drop of about €100/tonne to make our business profitable again,” said yet another buyer. “PP is just too expensive.”

The likelihood of PP prices increasing further in the first quarter of 2008 was small, and this meant that buyers were holding back from significant purchases, expecting the next trades to be at worst the same price as current values.

Many expected prices to fall in April, if not before, as spot propylene was weaker than the current contract level of €945/tonne FD NWE, leading to expectations of a drop in second-quarter monomer prices.

Most sources agreed that this would set the ball rolling for lower PP prices in the second quarter.

Some producers still felt that prices could move up in February, while others saw this possibility as unlikely, with the exception of some buyers in the UK, whose prices in euro terms were significantly lower than buyers in mainland Europe.

New production in Saudi Arabia was imminent, with Advanced Polypropylene Co due to start production at its 450,000 tonne/year Al-Jubail PP unit at the end of March, while India's Reliance will bring its 900,000 tonne/year PP plant at Jamnagar in Gujarat, on stream in June 2008.

PP producers in Europe include Borealis, LyondellBasell, INEOS Polyolefins, Total Petrochemicals, SABIC, Dow and Repsol.

($1 = €0.69)

For more on PP visit ICIS chemical intelligence

By: Linda Naylor
+44 20 8652 3214

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