Europe PO contract prices firm in January on feedstocks

13 January 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--The rise in propylene feedstock costs have largely pushed up European propylene oxide (PO) contract prices by €16/tonne ($21/tonne) in January, market players said on Friday.

The formula-related PO contract prices increased by €16/tonne, in line with 80% of the propylene movement, and freely negotiated business followed a similar uptrend, supported by increased cost pressure and a relatively balanced market.

To reflect this, the price range has been moved up to €1,474-1591/tonne FD (free delivered) NWE (northwest Europe). Numbers on either side of this were also heard in a few cases, but they were not widely confirmed.

PO consumption is generally shaping up reasonably well in January, although it remains to be seen whether this is temporary restocking or pre-buying in anticipation of higher propylene feedstock costs or more of a fundamental change. By contrast, seasonal demand into the downstream monopropylene glycol (MPG) sector remained below expectations for the time of year, because of relatively mild weather conditions.

Producers are hopeful that export opportunities for derivatives will be helped and imports discouraged by the weak euro against the strong dollar, which could stimulate domestic demand. However, one customer said that while European derivatives become more competitive from an exchange rate perspective, it is being cancelled out by higher feedstock costs.

There is some talk that PO production has already been aligned to demand in some cases, although utilisation is still seen to be relatively high. One manufacturer said it had not yet reduced its output, despite low seasonal downstream demand, because it is waiting for a clearer picture about demand to emerge over the next few weeks. Although the same source said it does not rule out the possibility of some adjustment in rates, if necessary.  

($1 = €0.78)

By: Heidi Finch
+44 20 8652 3214

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