Europe-Asia PP arb window now firmly closed

05 August 2009 16:49  [Source: ICIS news]

LONDON (ICIS news)--Polypropylene (PP) arbitrage opportunities from Europe to Asia are no longer viable as European prices are on the rise again in a very tight market, sources agreed on Wednesday.

“Our stock level is completely unliveable,” said a major PP producer. “Arbitrage opportunities have vanished.”

European net prices for homopolymer injection were now close to €900/tonne ($1,304/tonne) FD (free delivered) NWE (northwest Europe), with producers pushing for more in August. Southeast Asian prices were at $1,130-1,180/tonne CFR, with slightly lower levels reported from China.

Exports from Europe had been very strong in the second quarter of 2009, as stocks were high and European net prices languished below €700/tonne FD NWE on the back of oversupply and very low demand. South Asian prices were firm, moving well above $1,000/tonne CFR at the same time.

China imported a total of 3m tonnes of PE and 1.5m tonnes of homopolymer PP grade in the first five months this year, which was almost twice as much and 36% higher compared with the same period last year, according to China customs data.

Demand in Europe had improved in the past weeks, and production cutbacks, coupled with earlier strong export volumes from Europe, have led to very limited supply of all PP grades in Europe.

“People I haven’t heard from in years have been asking me for PP but I just don’t have any,” said a trader.

Buyers generally accepted that they would have to pay increases in August, but some sellers were looking beyond, into September, for more increases.

“Inventories are low along the chain. I need lower demand in August to help me get back to a workable stock level,” said another producer.

The long-awaited new capacities from the Middle East and Asia had still not produced any significant quantities of material for Europe, or indeed Asia. Sources now speculated that the new plants might not have any impact on markets globally before the end of the year, at the earliest.

PP and polyethylene (PE) producers in Europe include LyondellBasell, Borealis, SABIC, Total Petrochemicals, Dow Chemical, Repsol, INEOS Olefins and Polymers, Polychim and Domo.

($1 = €0.69)

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By: Linda Naylor
+44 20 8652 3214

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