Europe PO prices in May soften on costs

18 May 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--Most European propylene oxide (PO) contracts for May have been agreed down €12/tonne ($15/tonne), on lower propylene feedstock costs, market players said on Friday.

The PO range for May, according to ICIS, has been moved down to €1,618-1,728/tonne FD (free delivered) NWE (northwest Europe).

This is the first PO contract price range reduction in 2012 and follows successive feedstock related increases during the first four months of 2012, according to ICIS price history.

The €15/tonne reduction in upstream propylene costs in May translates into a decrease of €12/tonne for PO formula-related business. This is in line with 80% of the propylene movement.

Freely-negotiated PO business generally followed the formula-related downtrend in May. This is because lower propylene feedstock costs were weighed against fairly balanced market conditions.

Lower reductions of €10/tonne in May, and rollovers, were also mentioned by one producer depending on starting point. However, there was no other market confirmation to substantiate this.

PO consumption continues to hold up relatively well, despite economic uncertainty.

One producer said that its demand remains robust, with May set to be the best month so far this year. Another buyer said that its orders also remain good, although it attributed this to gaining some business from a competitor which had experienced supply constraints.

A few buyers, however, described demand as satisfactory, but not as good as it could be at this time of year, which they attributed to heightened concerns about the eurozone sovereign debt crisis.

The market was described as relatively balanced. However, a few buyers considered supply balanced to slightly long, because of reasonable-to-slower demand in some cases. By contrast, one producer suggested that the market was slightly tight, but this was not confirmed by any other player.

($1 = €0.79)

By: Heidi Finch
+44 20 8652 3214

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