07 March 2011 12:02 [Source: ICIS news]
LONDON (ICIS)--Polypropylene (PP) buyers in Europe are under very strong pressure to pay higher prices as a series of record high price increases shows no signs of abating, market sources said on Monday.
Homopolymer net injection prices have approached €1,400/tonne ($1,944/tonne) FD (free delivered) NWE (northwest Europe) and sometimes traded above this level, as producers sought to cover the €80/tonne increase in the propylene monomer contract for March, which settled at €1,185/tonne FD NWE.
As recently as November 2010, PP levels were at €1,150/tonne FD NWE.
March pricing discussions were said to be tough, and so far there is no sign of any flexibility from European PP producers to their converters.
“For the moment, I haven’t closed the month. But it doesn’t look like I can get less than plus €80/tonne,” said a buyer. PP producers were targeting increases up to €100/tonne, but some sought only to cover the €80/tonne upstream price hike.
Several converters said that they simply would not buy PP in March, while others said they would minimise purchases as much as possible.
“We will try to reduce our production capacity by stopping working at the weekends, for example,” said the buyer. “It’s crazy to put stock into our warehouse at this price.”
PP prices are now above the level they had been at in 2008, €1,250-1,300/tonne FD NWE, when Brent crude oil briefly traded at $147/bbl.
At midday on Monday, Brent crude was trading up more than $2/bbl from the previous close at around $118/bbl as a result of the unrest in Libya.
Tensions in the European PP market were running high.
“[Producers] have no respect for their customers,” said another buyer. “We are really suffering.”
Buyers are hopeful that arbitrage opportunities, which have arisen from high prices in Europe, will lead to a shift in the balance of the market.
Demand is not particularly strong, buyers said, and price increases are being forced on the market because of reduced production rather than because the market was healthy.
Prices in Asia were trading up to $1,700/tonne CFR (cost and freight), however, and the trend was perceived as upward. With duties of 6.5% on most imports coming to Europe, along with freight rates and distribution costs, imports were still not widespread.
PP is used widely in the manufacture of household goods, packaging and in the automotive sector.
($1 = €0.72)
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