24 February 2010 13:54 [Source: ICIS news]
LONDON (ICIS news)--Polypropylene (PP) buyers in Europe will be under heavy pressure to accept higher prices in March as product availability remains restricted, largely due to propylene restraints that have been exacerbated by recent strike action in France, sources said on Wednesday.
INEOS said it planned to increase March PP prices by €70/tonne from February.
“Our aim is to regain margin,” said a source with INEOS. “We are not happy with the increases we have achieved so far this year.”
“Our margins are squeezed, mainly due to the high cost of spot propylene, and this sort of increase reflects the tight situation in PP at the moment,” said the INEOS source.
PP prices had increased by €150-170/tonne in January and February combined, leaving homopolymer injection net prices in the range of €1,020-1,050/tonne FD (free delivered) NWE (northwest ?xml:namespace>
Propylene monthly contracts rose by €125/tonne in the same period.
PP buying was done strictly on a hand-to-mouth basis in Europe, as prices were high and expectations of lower prices were rife due to new capacities coming on stream in the Middle East and
The new plants were slow to achieve full capacity, however, and European buyers were still in the hands of domestic producers.
“If buyers are buying on contract, they will have to pay higher prices in March. The market is tight and the likes of INEOS and Total will dictate market terms,” said a trader.
“That tightness will go as more Middle Eastern producers offer for the second half of 2010 and 2011,” said the trader.
Not all producers were aiming to go above the March monomer increase of €35/tonne.
“We will be looking to cover monomer,” said another European PP producer source.
“The market has misjudged the import situation enormously,” the source continued. “For two years now, we have been talking about a tsunami of imports which would impact the European market. Now it looks likely to be absorbed more naturally into the market.”
However, several sources said they still expect Middle Eastern production to affect the market more actively.
“The PP market in
Buyers were not happy with INEOS’s announcement on Wednesday of a €70/tonne hike for March PP.
“I don’t think they understand our situation. They are showing a total disregard for their markets. Ultimately, they will damage their converters. It’s too much,” said a frustrated buyer.
Another buyer said: “No way will they get a €70/tonne hike in March. The market is too weak.”
Buying was expected to remain low as buyers waited for better prices. But sellers pointed out that March was a seasonally strong month, and they were confident in their approach for business next month.
PP producers in
($1 = €0.74)
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