Europe November PP prices slip on lower propylene contract

02 November 2009 16:15  [Source: ICIS news]

LONDON (ICIS news)--Polypropylene (PP) prices in Europe have slipped by €20/tonne ($29/tonne) at many accounts as November pricing discussions got under way, sources confirmed on Monday.

“I’ve been offered minus €20/tonne from last month, but I am looking for a €30/tonne decrease,” said one keen buyer.

Another buyer, who was looking for lower than €900/tonne FD (free delivered) NWE (northwest Europe) for spot product on a net basis, said: “My internet source has gone down by €20/tonne this month but I’m still not buying. It’s still too expensive.”

Monthly business in October had settled in the mid-€900s/tonne FD NWE on a net basis, but demand tailed off in the middle of the month as sources waited for the settlement of the November propylene contract.

The monthly monomer contract was settled at €740/tonne FD NWE, down by only €10/tonne from the September contract.

“They really fought over that [propylene] contract,” said a major PP producer. “There is no room to go down much in PP.”

Another major PP producer said it was still aiming to roll over November prices.

“Inventories along the chain are very low. Our sales force has clear instructions not to decrease prices,” said the major PP producer.

Sources generally agreed, however, that production, which was now estimated to be running at around 80% of capacity, would have to remain cut back for the foreseeable future.

“We will see more cracker reductions. This will take the pressure away from PP,” said another producer.

Demand for PP, while still estimated to be 10% below that of 2008, was better than demand for polyethylene (PE).

Sources speculated that crackers would need to be cut back mainly because of the poor PE situation, and this would inevitably affect propylene output.

Propylene is a by-product of a naphtha-cracking process.

Earlier in 2009, due to cracker cutbacks, propylene availability became so tight that it affected PP production, and producers said they felt that the situation could arise again if crackers were reduced further.

New polymers capacities were finally beginning to have an impact in Europe, however.

Spot offers from the Middle East, while still not very plentiful, were reported to be increasing, with levels below €900/tonne FD NWE offered.

PP producers said they were watching the Asian situation with interest, as further price hikes could lead to export possibilities, which were currently not feasible.

Homopolymer injection prices at $1,100/tonne CFR (cost freight) China were not workable from Europe, but sources said that possibilities could emerge if prices in Asia continued to firm.

Fresh economic data from China revealed that HSBC’s China Purchasing Managers’ Index (PMI) hit an 18-month high for October at 55.4.

($1 = €0.68)

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By: Linda Naylor
+44 20 8652 3214

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