Europe PP buyers welcome lower prices after months of rises

30 July 2010 10:56  [Source: ICIS news]

LONDON (ICIS)--Polypropylene (PP) buyers in Europe are finally being offered lower prices after several months of increases which came to an end in July, they said on Friday.

“The decreases being offered are not that big but at least we are no longer being faced with increases. It’s a real relief,” said a beleaguered buyer.

Prices had risen by over 30% in 2010 due to restricted availability of propylene and subsequently PP.

Some producers made it clear that they would be bringing their PP prices down in line, at least to a certain extent, with the new August propylene monomer contract, which settled at €940/tonne, down by €38/tonne ($50/tonne) from the July level.

Other producers felt that the tight supply/demand balance, which was still a feature of the European PP market, would support a rollover.

A new declaration of force majeure was made this week as the 300,000 tonne/year PP joint venture between Total Petrochemicals and INEOS at Lavera in France went down. Buyers said that they had been informed that the plant would be down for several weeks, but there was no confirmation from either producer.

Total already had force majeure restrictions in place on PP deliveries in Europe, applied in May, after unplanned technical issues at an undisclosed site, widely thought to be Feluy in Belgium.

Imported PP was offered from some sources into Europe but there was no flood of product from the Middle East which buyers had been expecting for many months.

“I have been offered copolymers at €1,270-1,280/tonne [delivered] from importers,” said another buyer, “but if the material isn’t in Europe and can’t be delivered immediately, I’m not interested.”

Many observers now only expected significant quantities of imported product to arrive in Europe in the fourth quarter of 2010, but even then they expected European producers to keep production levels under control to avoid oversupply.

Another buyer said: “As long as European producers keep on reducing production, there won’t be a significant price drop.”

Many of the new capacities starting up in the Middle East had joint venture partnerships in Europe, and these players were clearly loath to flood the market with product which would harm their domestic businesses in Europe.

Asia was also showing strong signs of increases this week after a period of erosion and poor demand.

Traders were reported to be anticipating a rush for pre-Christmas production in China, and demand was improving quickly.

European PP price discussions for August were expected to take place in the coming days.

($1 = €0.76)

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By: Linda Naylor
+44 20 8652 3214

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