FocusEurope buyers see pricing relief in March PP

25 February 2008 16:51  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS news)--Disappointing polypropylene (PP) demand in early 2008 and slow activity in the distribution sector are exerting downward pricing pressure in the March European PP market, market sources said on Monday.

“We started the year well as everybody expected to be paying higher prices on the back of the [€57/tonne] increase in first-quarter propylene,” said one supplier.

“But since then demand has been disappointing and imports in southern Europe in particular have been on offer at keen prices.”

It was clear that there were no longer any product shortages and many now expected some easing of prices into March.

Most February PP monthly business was settled at a rollover, agreed several large buyers, with homopolymer injection prices trading in the mid-to-high €1,200s/tonne ($1,791/tonne) FD (free delivered) NWE (northwest Europe) on a gross basis.

There were no widespread expectations of a price collapse, however, as oil and naphtha remained very firm.

Brent crude oil was trading at $96.95/bbl on Monday, with naphtha at $862-866/tonne CIF (cost insurance freight) NWE.

“I need a drop of about 7% to get back into the black,” said one PP buyer.

High oil prices would support propylene to some extent, market sources said, but spot propylene was still below the first-quarter level of €945/tonne FD NWE. The latest spot monomer deal was done last week at €865/tonne CIF NWE.

Second-quarter propylene discussions were expected to be protracted.

March PP was not yet fully under discussion, but several buyers felt that a reduction of €30/tonne was inevitable, with some aiming for a little more.

“Buyers are more relaxed now,” said another producer. “Last year they went through a period of shortages and it’s clear that the market is no longer short. It is by no means long, though, and fundamentals are still very sound.”

European PP buyers were under strong upward pressure during the summer of 2007 as two PP units closed down for good and there was little alternative supply available.

LyondellBasell (then Basell) stopped production at its 240,000 tonne/year PP unit at Pernis in the Netherlands at the end of June 2007, and INEOS Polyolefins closed its 200,000 tonne/year Geel, Belgium PP1 homopolymer line mid-year.

The two closures added pressure to an already tight availability situation in the European PP market, which lasted well into the fourth quarter of the year.

Homopolymer prices rose from €1,130/tonne FD NWE in January 2007, to €1,265/tonne FD NWE in October, and there has been little relief for PP buyers since.

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

($1 = €0.67)

For more on PP visit ICIS chemical intelligence

By: Linda Naylor
+44 20 8652 3214

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