03 August 2012 23:59 [Source: ICIS news]
LONDON (ICIS)--Most European polypropylene (PP) producers are targeting August price increases of €170-200/tonne ($207-244/tonne) in an attempt to improve their margins, market sources said on Friday.
Producers said they were targeting increases of €170-200/tonne, representing the propylene hike plus a margin improvement of at least €50/tonne, and initial August price settlements were heard at increases of €130-200/tonne from July.
Buyers accepted that a pass-through of the monomer increase was unavoidable, but expressed concern about producers’ attempts to recover margin in what is traditionally a quiet month, on account of many players being on holiday.
A buyer said it had agreed to an increase of €150/tonne for August with its supplier, which represented a reversal of the July decrease plus a modest amount of margin improvement for the producer.
A UK buyer said it had agreed to an August price at the equivalent of plus €100/tonne, but said other offers were at least €120-130/tonne above July price levels.
A third buyer said it had decided not to purchase any PP this month, as its supplier had targeted an increase of €140/tonne. However, the buyer acknowledged that it would have to accept the increase in September.
One producer said it had concluded the majority of its August domestic business at a weighted average of plus €145/tonne from July.
Another producer said it had agreed to prices for most of its August volumes at increases of €160-170/tonne, but noted that it had reduced its operating rates because of poor margins.
Sellers described demand as acceptable given the time of year, but buyers said that many consumers will run their plants at reduced rates or cease operations entirely for at least part of August.
One reseller suggested that prices could be revised down by a modest amount from the initial targets and said that neither buyers nor sellers are under too much pressure to move volumes this month.
Another reseller said end-users would not object to a pass-through of the propylene increase but were not supportive of margin increases.
The source said that many buyers had purchased a lot of material in July and were likely to wait as long as possible before re-entering the market, on the assumption that September would see little change in prices.
Market participants said August price settlements would depend to some extent on individual outcomes for July, with buyers that had secured larger decreases last month receiving the greatest increases in August.
The July propylene contract fell by €170/tonne, and a full pass-through was initially offered by some PP producers to their customers, before rising naphtha prices prompted an abrupt change in sentiment.
PP prices increased rapidly in response to the surge in naphtha prices, which eroded cracker margins, but large quantities of PP had already been transferred from sellers to buyers.
Domestic prices were heard settled at decreases of €70-170/tonne for July, although average decreases from June price levels were judged to be in the range of €90-120/tonne.
Reflecting the August propylene settlement, domestic prices for raffia and homopolymer injection grade PP were assessed by ICIS on Friday at €1,315–1,355/tonne and €1,315–1,365/tonne FD (free delivered) EU respectively, up by €120/tonne, while copolymer grade was at €1,365–1,410/tonne FD EU, also up by €120/tonne.
PP is used widely in the household goods, packaging and automotive sectors.
($1 = €0.82)
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