03 November 2011 11:37 [Source: ICIS news]
The European November propylene contract price was fully settled at €1,013/tonne FD (free delivered) NWE (northwest Europe) on Thursday, down by €55/tonne ($75/tonne) from October.
“I have just put the phone down from settling November with my first supplier,” said a medium-sized PP buyer. “They have given me a reduction of €55/tonne.”
On a spot basis, net homopolymer injection PP prices are now trading below €1,100/tonne FD NWE in some cases. The last time this level was reached was in March 2010.
Monthly pricing on a gross basis is now reported at €1,245/tonne FD NWE at those accounts where the €55/tonne decrease has been applied. A similar level was also last reported in March 2010. This price is subject to discounts.
Demand in October was not as bad as many had expected, but domestic European volumes were boosted by exports and spot lots to large buyers at keen prices. November demand is expected to be slow, given the current economic climate.
Buyers are cautious, and both sellers and many buyers aim to end the year with low stocks. However, some buyers admit that they will be buying more than they need to use immediately, as they want to take advantage of end-of-year volume rebates.
Rebates at the end of the year are linked to an agreed volume usually discussed at the beginning of the year. If agreed volumes are not reached, the discount is not applied.
A couple of major PP producers have already presented their stance for November pricing, and have given the full propylene decrease of €55/tonne to their buyers, but others are more cautious.
“We need to improve margin, so we are trying to limit the decrease [for November PP pricing] to €20/tonne,” said one major producer.
Another producer stated similar aims, but most sources admit that PP prices are unlikely to remain stable, given that some prices are already being done at €55/tonne below the October level.
Production is being cut back to avoid oversupply, and one of the producers canvassed expects this to have an impact in January 2012.
“Everybody is cutting back, so when buyers come back in January to buy, there simply won’t be any material and they will have to wait and pay more,” said the producer.
PP is used widely in packaging and household goods applications.
($1 = €0.73)
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