Europe PP producers seek more hikes in May on tight supply

23 April 2010 12:27  [Source: ICIS news]

(Recasts, clarifying headline)

PolypropyleneLONDON (ICIS news)--Polypropylene (PP) buyers in Europe will face more price increases in May as producers formulate plans after the May propylene contract was settled up by €20/tonne on Thursday, sources said on Friday.

The new monthly monomer contract was settled at €1,000/tonne FD (free delivered) NWE (northwest Europe), up by €20/tonne from the April level.

“We are looking to improve the spread between propylene and PP by €25/tonne,” said one major producer.

Another with similar expectations said: “We are looking to increase prices by about €50/tonne in May.”

A third said it would be looking for a three-digit increase, but several market sources said this would not be feasible as some other producers were aiming for less.

PP buyers were not happy with the current situation. Prices had risen already by over 30% in 2010, and several reported that they were finding circumstances very tough.

"We will bend our backs and weather the storm,” said one buyer. “Prices will clearly be higher in May, but I think we are seeing the top.”

May was widely seen as a sellers’ market largely due to reduced availability rather than strong demand.

Sales volumes had picked up, however, and small technical issues in Europe were having a further tightening effect on an already difficult supply situation.

One major producer reported strong demand growth in April, at the same time admitting that the recovery was still fragile.

“We have had our strongest demand month since October 2008,” said a company source. “What was unusual was the strength of demand in the last week of March, as it became clear that April prices would go up.”

Some producers expressed sympathy with buyers, but said they too needed to make some money.

“It’s true. Our customers need to breathe. We wanted a rollover in May propylene, and we need to get a bit of a margin increase,” said one.

There was a widespread feeling among buyers that prices were getting close to the top of the cycle.

“We have enough stock to go without buying from European sellers until July. I think the current stronger demand is based on stock-building and that will come to an end soon. If crackers are running flat out, we will soon see the shortages end,” said another buyer, who had bought some imported product that was due to arrive in Europe in May.

Net PP prices were still in the region of €1,200/tonne FD NWE for homopolymer injection in April, but new offers for May were already available on companies’ website.

New prices from LyondelBasell’s web-based sales platform, Alastian, are already higher, a buyer said.

“Copolymer has gone up to €1,325/tonne plus delivery from the April level of €1,260/tonne [plus delivery]. Homopolymer’s the same - up to €1,235/tonne plus transport,” the buyer added.

Buyers felt that May would remain a sellers’ month, but they envisaged better opportunities as the year progressed, expecting lower propylene prices in June and July, to be translated into lower PP prices.

They also expected new capacities from Asia and the Middle East to have an impact on PP pricing globally.

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

($1 = €0.75)

For more on PP visit ICIS chemical intelligence
For more on LyondellBasell and other PP producers visit ICIS company intelligence
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By: Linda Naylor
+44 20 8652 3214

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