23 September 2009 18:04 [Source: ICIS news]
By Linda Naylor
LONDON (ICIS news)--European polypropylene (PP) buyers are sitting tight in the second half of September as lower spot offers enter the market, while producers wait for the October propylene settlement before indicating next month's business, market sources said on Wednesday.
“It’s going down,” said a medium-sized PP buyer in the commodity market. “Well, it’s not actually going down, but it will go down.”
The buyer paid a hefty hike for the small quantities of material he had bought directly from a European producer earlier in September, but reported increased amounts of spot offers for the second half of the month.
“I can feel the nervousness and the restlessness in the market. Traders are looking to have zero stock at the end of the month, and they are offering at lower prices,” added the buyer.
Buyers expected the market to ease after a serious hike in September which lifted European PP prices by €90-100/tonne ($132-147/tonne). Homopolymer injection prices traded above €1,000/tonne FD (free delivered) NWE (northwest ?xml:namespace>
Net prices have now eased below €950/tonne FD, but these offers came only from traders, not producers.
“They (producers) will hold out as long as possible, that’s only natural,” said a trader, “but they shouldn’t have pushed so hard earlier. They pushed it to a level where they were saying “don’t buy” to their customers.”
Product has tightened, mainly due to cracker cutbacks, restricting propylene availability. This has led to producers hiking prices on buyers in September, forcing market demand to quieten by the middle of the month.
“I have bought most of my October needs already,” said another buyer.
Producers still felt that October would remain firm.
“Stocks are very tight everywhere. Nobody has any spare product so even if demand is not strong, our stock position can take it,” said one.
Some sources expressed concern that high European PP prices would attract imports.
The new, long-awaited Middle Eastern capacities have yet to make a dent in European markets, but buyers felt the current disparity between regions could lead to new imports.
“They are going to end up by coming to
“The natural destination for the new material is to
“It’s a bit tricky at the moment,” admitted another producer, “but we are clearly not interested in reducing prices.”
European PP demand was currently 10% below 2008 levels, but one producer estimated this was closer to minus 5% if exports were taken into account. Exports were particularly strong in May to June of 2008, but there were fewer possibilities to export PP.
“We can still send some specialities abroad,” said the producer, “but you can forget exporting commodities at present.”
Despite talk of lower PP prices in the coming weeks, even the keenest buyers did not expect a rerun of 2008 when net prices more than halved during the last part of the year. The price of homopolymer injection dropped from €1,250/tonne FD NWE at the end of August, to just €600/tonne FD by the year end.
“We won’t see prices collapse like last year,” said a trader. “Brent and naphtha are still relatively strong and we don’t expect to see the distressed sales of last year. The whole system has shown resilience this year.”
To avoid oversupply, PP production was cut back for several months. Cutbacks at the cracker level were also reduced, mainly to minimise ethylene output, further affecting by-product propylene production.
October propylene was expected to be settled by the end of September. Sources generally expected anything between a rollover and small increase from the current September contract of €778/tonne FD NWE.
PP is a versatile polymer, used in the automotive industry, food packaging, health and hygiene products and carpet manufacture.
PP producers in
($1 = €0.68)
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