Europe PP buyers expect to get relief from price increases

29 April 2010 11:44  [Source: ICIS news]

LONDON (ICIS news)--European polypropylene (PP) buyers are finally expecting some relief from the constant round of price increases, which have put values up by 30%, or €300/tonne ($395/tonne), since January 2010, several market sources said on Thursday.

“We are betting internally on when prices will start to fall,” said a large buyer. “I am betting on the second half of May, against my colleague, who thinks it will be June.”

Prices were still moving up for most May business, however, but targets of plus €100/tonne were seen as unrealistic by most buyers and sellers.

“I have been offered plus €20-50/tonne so far for May,” said another large buyer. “I haven’t settled yet, and the increase I accept will be based on the starting level of the business I’m discussing.”

Homopolymer injection net prices were currently discussed at €1,210-1,260/tonne FD (free delivered) NWE (northwest Europe) for May business.

“Product is still tight. You need to pay an increase to get the material, but sellers fold quickly and move down from their initial plus €50/tonne to plus €30/tonne,” said another buyer.

One major producer said it expects increases to be divergent in May, for the first time this year, depending on sector.

“The [bottle] caps and closures sector is still really buoyant, but carpet manufacturers are having a really hard time of it,” said the major producer.

Imports were not reported offered on a widespread basis, but there were high expectations among buyers, if only for the second half of 2010, and there were small amounts on offer for delivery at the end of May.

“We have bought some PP, which will arrive in our warehouse at €1,170/tonne delivered,” said one of the buyers. “There is a risk, because European prices may have started falling by then, but I think the risk is minimal.”

Some buyers, however, said they expect PP prices to drop rapidly when values finally do start to fall.

“When the market turns, it will be very quick,” said another large buyer.

A trader said: “The downturn will be bloody. [Producers] have pushed pricing up hard and high, they will pay for it.”

Another market observer said: “Even producers can’t keep the lie going for ever,” referring to the fact that big PP price increases in 2010 were based on reduced output, often due to the prohibitively high cost of spot propylene monomer, rather than strong PP demand.

Year-to-date PP volumes were reported to be around the same as those in 2009, catching up to March levels from what had been lost in two very poor months at the start of the year.

“We have started building up some stock now,” said another large buyer. “We have some flexibility in May, which we didn’t have earlier this year. Prices will go up, but we don’t expect any more than the €20/tonne of May propylene.”

The May propylene contract was settled at €1,000/tonne FD NWE, up by €20/tonne from April.

Expectations were now for propylene prices to ease in the short term. Imported product was said to be on its way from the US to Europe, but the tightness in upstream monomer had begun to ease.

“Internally, we are working on lower propylene prices for June and July,” said another PP producer.

Several buyers expressed anger at the way producers had pushed prices up in 2010.

“There is no way to justify increases beyond the monomer increase,” said a buyer, “and I will be holding out for a rollover. Producers will be on the run soon, and I will be taking advantage of that.”

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

($1 = €0.76)

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By: Linda Naylor
+44 20 8652 3214



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