10 November 2011 12:02 [Source: ICIS news]
The November propylene contract settled at €1,013/tonne FD (free delivered) NWE (northwest Europe), and PP was offered at a similar drop from October almost immediately by some sellers. They have been loath to go beyond the amount of the propylene decrease, however.
“I have been able to get [a] €60/tonne [decrease] from one of my suppliers but the rest wouldn’t go more than €55/tonne,” said one buyer.
Some producers had been hoping to limit the PP decrease to €30/tonne, but there has been little support for this in the market in general.
PP demand has been weak in recent weeks, and prices have dropped accordingly.
In September net homopolymer injection spot prices were at €1,170/tonne FD NWE, but have fallen to €1,050/tonne FD NWE in November. The lowest spot offers have come from producers with large parcels to sell at chosen accounts with good credit records. Traders are unable to compete at such levels and offers of imports from South Korea are heard higher than producers’ lowest spot levels.
Producers have also used export outlets to support weak European demand, and have sold at the prevailing levels in October. Cutbacks at the PP and cracker level are now in place and producers expect to be able to end the year with low stock levels.
Some buyers expect PP prices to fall again in December, but there is no widespread expectation of a price crash, as crude oil and naphtha prices rally, and cracker margins come under more cost pressure.
Market segments are behaving differently in the European PP arena, and while demand has been lower than many had hoped, October volumes turned out to be reasonable by the end of the month.
“Early in October we thought demand was awful, but it came in slowly throughout the month,” said a seller.
“The leitmotif running through the market at the moment is production at a minimum, sales at a minimum,” said a producer.
One major producer is expecting production cutbacks to have an impact on pricing sooner or later.
“Buyers will find that when they come back into the market to reconstitute some stock, there just won’t be the volumes available. It might be January, or even February, but it will happen,” it said.
Meanwhile, most players did not expect much more change in PP pricing in November, and wait for the December propylene contract to settle for some direction. It is too early to tell where propylene will land next month, but with the current increase in crude oil and naphtha prices, coupled with the weakening euro, sources do not expect much change in December.
PP is used widely in the packaging, hygiene, household goods and automotive sectors.
($1 = €0.74)
For more on PP visit ICIS chemical intelligence
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