FocusSurging Europe PP prices approach record high

08 March 2012 12:14  [Source: ICIS news]

(recasts, clarifying paragraph 8)

LONDON (ICIS)--Polypropylene (PP) prices in Europe have surged again in March, as propylene supply problems and PP cutbacks affect supply, sources said on Thursday.

Homopolymer injection prices have reached €1,380/tonne ($1,816/tonne) FD (free delivered) NWE (northwest Europe), close to their record high of €1,410/tonne FD NWE in March 2011.

Brent crude oil is trading around the $125/bbl mark at present, compared with its former high of $148/bbl in July 2008, but in euro terms, producers stress that the current crude oil price is higher than then. In July 2008 PP was at €1,255/tonne FD NWE.

PP prices are not fully settled for March but there has been a clear upward move following the March propylene settlement at a €90/tonne increase.

“I have managed to get plus €90/tonne from one of my suppliers but the others are asking for plus €130/tonne,” a PP buyer said. “I will wait and if they carry on asking for so much, I just won’t buy.”

“I expect to be paying an increase of €90–100/tonne,” said a very large buyer.

However, some producers are sticking to targets of plus €130/tonne.

PP prices rose by €120/tonne in February, leaving 2012 hikes over 30% in this market so far this year, and some players now feel that prices are too high.

“Anybody with any stock won’t buy now,” said a trader. “There’s a risk that it’s overheating.”

“We will be looking closely at the possibility of destocking during the second half of March,” said another buyer.

“They [producers] have a false picture of how much stock we [converters] have,” another added.

One large buyer suggested demand is reasonable, adding that its buyers are building stocks to avoid expected price increases passed on from converters in the second quarter.

Whatever the outcome for March PP pricing – and few converters argue that prices will not rise significantly this month – views on April differ.

“The momentum will continue into April,” said one producer. “Availability is tight, crude is high and producers’ margins are still poor. I can’t see anything changing yet.”

“We expect prices to start falling in April,” said one of the buyers. “We have stocks, and imports are being offered from all over the place with prices so high here.”

Asian markets have been lacklustre but recent small hikes have left homopolymer prices around $1,400/tonne (€1046/tonne) CFR (cost & freight). With freight rates now considered to be a minimum of $100/tonne from east to west, a minimum of six weeks lead time and a duty as high as 6.5%, buyers are hesitant.

The likelihood of material coming from the Middle East to Europe is stronger, and some sources say they have been offered product at $1,500–1,510/tonne CIF (cost, insurance & freight) Italy. A 3% duty and costs of around €50/tonne would have to be added to this number to arrive at a DDP (delivered, duty paid) price.

These concerns are not affecting the market for March, however, and the current question is whether monthly prices will rise by €90/tonne or €120/tonne.

PP is used widely in the packaging and automotive sectors.

($1 = €0.76)

By: Linda Naylor
+44 20 8652 3214

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