FocusEurope May polypropylene prices up on tight availability

10 May 2010 12:33  [Source: ICIS news]

By Linda Naylor

Europe May PP prices rise on tight availabilityLONDON (ICIS news)--Polypropylene (PP) buyers in Europe are paying more increases in May as production issues continue to affect availability, sources said on Monday.

“We have huge shortages of PP,” said one large buyer. “We will have to pay increases but we are still discussing for May.”

Another buyer said: “I have closed around a third of my buying for May, and am paying €30-40/tonne more than in April.”

Other buyers confirmed purchases for May at an increase of €30/tonne ($38/tonne) over April.

Net prices for homopolymer injection were now reported at €1,250/tonne FD (free delivered) NWE (northwest Europe) minimum from western European selling sources, according to buyers.

Buying sources had hoped that the tight situation would ease after paying increases of €300/tonne, or around 30%, between January and April 2010, but force majeure restrictions from Total - called on Thursday 6 May - led to concern for deliveries from some buyers.

“This is a catastrophe,” said another large buyer. “If this lasts into next week, we will have to let our customers down.”

The duration of Total's force majeure was unknown. Indeed, the company has not disclosed the location of the affected plant but it was widely believed to be at Feluy in Belgium. Unconfirmed speculation over the cause of the problem suggested that it was a propylene pipe issue which had led to the halt of production.

Force majeure restrictions were also still in place from INEOS’s 285,000 tonne/year PP plant at Grangemouth, UK. Restrictions were put in place on 18 March after a technical issue brought production to a halt. The plant had been running normally since the end of March but inventories were tight and force majeure remained in place.

Some production hiccups at INEOS’s UK PP site had affected production more recently, but the plant was now thought to be running normally.

PP availability had been restricted for some weeks, mainly due to propylene supply issues, and the prohibitively high cost of propylene which meant that competitive products, like nitriles, where margins were better than in PP, took spare propylene, leaving PP producers unable to pay the high cost of spot propylene.

The spot propylene monomer situation had now eased, but PP technical issues exacerbated the already tight scenario.

Several sellers now expected the strong PP market to continue into June, in spite of earlier expectations of new capacities affecting global markets by then.

“I can see May as another month where price ideas strengthen throughout the month rather than the opposite,” said a major PP supplier, “and I can’t see things easing in June, either.”

“March buying was the strongest in over a year,” he continued, “and April has been good too.”

The market eagerly awaited details of the Total PP situation, as Feluy was said to be the biggest plant in Europe, an estimated 10% of the European PP market, said one source.

Market sources said they were keeping an eye on what was happening to prices in Asia. The drop in crude oil and naphtha prices in recent days affected sentiment in this market, and homopolymer injection prices had slipped by $20/tonne, to $1,300-1,380/tonne CFR (cost and freight).

If prices continued to rise in Europe and fall in Asia there would be opportunities for material to cross the water. Trading sources hesitated to buy at present, as there was a widespread expectation of prices falling in the second half of the year. This expectation had been confounded many times already, however.

“People have been saying we will be flooded with Middle Eastern PP for months now and I haven’t seen any of it,” said a frustrated buyer, echoing the sentiments of many others.

Only limited quantities of imported product had been offered into Europe, but all sources - both buyers and sellers - expected the situation to change in the coming months. For the time being, however, the PP market remained in the hands of the sellers.

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

($1 = €0.78)

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By: Linda Naylor
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