07 December 2012 10:31 [Source: ICB]
European polypropylene (PP) players are watching upstream movements closely to see where December prices might land, but the mood is changing, as low offers have been withdrawn from the market by both traders and producers, several sources say.
"There is a strange silence out there," said one reseller. "Producers are saying nothing, but they have withdrawn offers for new deliveries."
Large spot volumes are no longer being traded as spot sellers suspect the possibility of higher prices. "We are no longer offering below €1,200/tonne [$1,558/tonne FD (free delivered) NWE (northwest Europe)]," said a trader, "but for the moment we are only doing truck business, no big volumes."
Homopolymer injection prices had fallen to around €1,170-1,180/tonne FD NWE on a net basis, with bids closer to €1,150/tonne FD NWE, but sellers are now trying their hand at €1,210-1,250/tonne FD NWE. So far they have had little success at large accounts.
Buyers, facing a month with few working days, remain very cautious. Many have low stocks but also low order books. "Demand is very, very poor," said one large packaging converter, "but if demand is poor, production is also cut back. I wouldn't be surprised if January prices go up."
Buyers in both the PP and polyethylene (PE) segments have seen prices move up in January in the past four years. "This is the only real reference we have for pricing in the new year," said the buyer.
The PE market has seen a more marked upturn in the past few days, and spot prices - when spot product has been available - have risen. PP has seen a less volatile pricing picture than PE, but many expect PP to follow the same path as PE.
The December propylene monomer contract price has not yet been settled, and most sources expect a minor decrease from its current level of €1,120/tonne FD NWE. Most sources expect any reduction in the propylene contract to be transferred on to monthly PP prices in December, but most producers have said little about December pricing intentions so far.
The new propylene contract is expected to be settled in the coming days. Upstream naphtha prices have remained relatively firm and are expected to support propylene.
So, in spite of weak demand, PP prices are widely expected to firm in January - but most sources expect any firming to be short-lived, as increases will be based on costs, rather than supply and demand. Visibility in this market is poor, however.
"In this industry we struggle to have a forecast for the following month, never mind next quarter," said the buyer.
PP is widely used in the packaging and automotive industries, and in the manufacture of household goods.
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