Europe PP buyers cautious in nervous market

04 May 2012 10:31  [Source: ICIS news]

LONDON (ICIS)--European polypropylene (PP) buyers are being cautious when placing orders for May, with smaller ones buying truck by truck, and for the week rather than the month, some market sources said on Friday.

“They ring up and want one truck of a particular grade immediately,” said a reseller, who suggested that inventories were very low with some converters.

Larger buyers are torn between wanting the best possible price and not pushing prices too low, as they need to recover the heavy increases they experienced in the first four months of 2012. Prices have risen by over 30% this year.

April demand for PP was weak, and producers are holding their breath to see how May pans out. Several report a good order intake in the early days of the month but there is concern that this could tail off as converters aim to leave May with no stock, in anticipation of another drop in the PP contract price in June.

The May propylene contract settled at €1,230/tonne ($1,618/tonne) FD (free delivered) NWE (northwest Europe), down by only €15/tonne from its April level. Many PP sources had expected a steeper fall in the contract price, and buyers were already expecting a €40–50/tonne drop in the PP price in May before the new monomer contract settled. They generally still expect such a drop in monthly pricing.

Spot PP prices are heard in a very wide price range and sometimes at levels well below those of April. Traders are said to be cutting prices to drum up buying interest and clear stocks, and there are increasing signs of producers offering low-priced spot product to selected customers.

“I have been offered copolymer at €50/tonne less than in April,” said one buyer, who added that new offers were around €1,320–1,330/tonne FD NWE. Others mentioned similar numbers although there is no wholesale offloading of all PP grades.

“On Monday [30 April] producers were talking of a rollover. On Tuesday it was minus €15/tonne,” said one buyer. “By the end of the week they have been offering some very good prices, but only on certain grades, not across the board. I have the impression that they have too much stock.”

Confidence has waned as the week has progressed but producers continue to report normal order books so far.

PP is used widely in the manufacture of household goods, packaging and in the automotive industry.

($1 = €0.76)

By: Linda Naylor
+44 20 8652 3214

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