Europe Feb PP prices soar to new record highs in balanced market

10 February 2011 10:36  [Source: ICIS news]

European PP prices at record highsLONDON (ICIS)--European polypropylene (PP) prices have reached new record levels in February following yet more price hikes, sources said on Thursday.

Homopolymer injection net prices were now at a minimum of €1,340/tonne ($1,836/tonne) FD (free delivered) NWE (northwest Europe), above their previous former high in June 2010 of €1,270-1,280/tonne, and well above their level of €1,250-1,260/tonne FD NWE in July 2008, when Brent crude oil was briefly at $147/bbl.

The lowest they had reached during that period was in December 2008, when levels of €620-630/tonne FD NWE had been confirmed, less than half of what they had been only weeks before.

Some buyers began to draw parallels between the third quarter of 2008 and now, and expected prices to begin to fall.

However, a producer said: “The situation is very different now. In 2008 stocks were high, and what we saw in the fourth quarter was down to destocking. Stocks are now low along the chain.”

Some smaller and medium-sized buyers had managed to build some stock at present, but if they wanted to buy in February they were forced to pay higher prices.

The February propylene monomer contract had increased by €35/tonne, and producers were able to push through this increase and sometimes more onto the PP market in February. January prices had also increased, by €100/tonne or more.

“I’m afraid plus €35/tonne is the best I can hope to get away with this month, and at the moment they are still asking for plus €50/tonne,” said a large PP buyer.

Many converters were convinced that PP prices had now reached the top of the current cycle. Demand was steady but not brilliant, but output was also restricted. INEOS had closed its PP order book for February on the 4th of the month, on what the company called exceptional demand.

Other producers reported less full order books but were confident of achieving increases as the supply/demand balance was so fine. A couple of PP producers reported orders down on expectations by 2-5%, while another feared that its demand might be considerably lower for the month.

“Large international buyers are buying as normal, but smaller ones are buying only what they know they can use, and are talking of cutting lines if they can’t recover these increases,” the producer said. “They [buyers] are getting angry, particularly those who also buy polystyrene.”

Polystyrene (PS) buyers had also been faced with increases over past months, and February prices were rising by at least €80/tonne, following a €100-130/tonne increase in January.

PP buyers had been expecting prices to ease for many weeks, and they sensed that March could be the month when this might happen.

Some converters said that they were not buying PP if they had not already secured the increases they had paid for granule in their own downstream markets. 

Brent crude prices were around the $100/bbl mark, and naphtha was little changed from when the February monomer contract had been settled.

“Producers’ margins are good now, they should shoulder some of these higher costs,” said a buyer.

However, this looked unlikely in the current climate.

PP is used extensively in the packaging and household goods sectors, and also in the automotive industry.

($1 = €0.73)

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By: Linda Naylor
+44 20 8652 3214

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