22 August 2011 12:03 [Source: ICIS news]
By Linda Naylor
LONDON (ICIS)--European polypropylene (PP) buyers and sellers are watching the volatile crude market with interest to gain an idea of where PP prices will land in September, several said on Monday.
“Everybody is just watching everybody else to see what will happen,” said one producer.
August business is now over and European prices have mostly fallen by €15/tonne ($21/tonne), in line with the drop in the propylene contract price.
Freely-negotiated PP accounts, as well as those with links to propylene, fell in line but some buyers reported more substantial drops by the middle of the month.
PP prices suffered far less turmoil in August than in June and July, when some fell by as much as €250/tonne over both months as imports made their way to Europe and demand waned on news of economic woes.
The focus of the PP market is now September, and more precisely, where the new European propylene contract will settle.
Economic worries have not gone away, but in spite of volatility in upstream crude and naphtha prices further significant falls have been avoided. Most sources acknowledge that there will be a fall in the new contract, but the extent of that is still open to discussion.
“The big issue now is September C3 [propylene],” said another PP producer.
Oil prices have been volatile over the last week and Brent crude started the current week almost $3/bbl down from Friday's close.
By late Monday morning, they had climbed back up, trading at $106.65/bbl, less than $2/bbl down on Friday’s close of $108.62/bbl.
This volatility, coupled with continued economic fears globally, has led to nervousness in all regions. Asian prices slipped a little last week on bearish global sentiment.
Some sources expect Europe to be firm in September, bolstered by a series of shutdowns upstream that will curtail propylene, and therefore PP, output. September is also traditionally a strong month for PP volumes.
Homopolymer injection PP prices are at €1,340-1,350/tonne FD (free delivered) NWE (northwest Europe) on a gross basis, subject to discounts of around 10% at large accounts.
“They can’t keep propylene high with the current difference between the spot price and the contract price,” said a large PP buyer.
Current propylene spot numbers are difficult to gauge due to lack of firm business but are widely talked below €900/tonne FD NWE. Chemical grade is well below this.
Activity in the European PP market is expected to remain muted until the September propylene contract settles, and several PP players feel that any agreement will be late this month as buyers and sellers weigh up the opposing elements in the market and their potential impact downstream.
PP is used widely in the automotive industry and in the manufacture of household goods.
($1 = €0.70)
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