26 March 2010 11:38 [Source: ICIS news]
LONDON (ICIS news)--Polypropylene (PP) producers in Europe are aiming for April price increases by up to €100/tonne ($133/tonne) after propylene prices settled €70/tonne higher compared with last month, several sources confirmed on Friday.
The April propylene contract settled up €70/tonne from its March level at €980/tonne on Thursday.
“We will be looking for a three-digit increase,” said one major PP producer, while another added: “It will be propylene plus a margin.”
PP availability was tight, mainly due to propylene constraints which had reduced PP output, and consequently the supply-demand balance was in favour of sellers.
PP is the major outlet for propylene, but competitive markets, and in particular nitriles where margins were better than for PP, took supplementary spot monomer, leaving PP short.
“Short availability [and] higher monomer… means one thing - higher prices,” said a trader.
PP buyers had already paid increases of €200/tonne in 2010, paying around €1,100/tonne FD (free delivered) NWE (northwest ?xml:namespace>
“We are looking for a lower number than the propylene,” said a major buyer who complained that increases in 2010 had been hard to absorb.
Inventories along the chain were low as buyers expected lower prices from new imported sources sometime in 2010, but for the moment they were faced with little alternative but to buy from local producers.
“We will buy as little as we possibly can,” said one buyer.
Producers said they were confident PP availability would remain tight throughout the second quarter of 2010 and even beyond, even though the European market was not considered to be fundamentally strong.
It’s true that March demand is better than January and February, but it is normal to see demand decline in the first two months of the year, said a major European producer.
“We have seen a seasonal pick-up, but not a major change,” the producer added. “All in all PP is not growing. It’s not a nice market. We are seeing a one-leg approach: pricing is based on supply shortages, not strong demand.”
Regardless of what pricing was based on, however, sources agreed it would be higher in April if converters wanted to procure material.
PP producers in
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