Europe polypropylene producers target January price hikes

02 January 2013 12:22  [Source: ICIS news]

LONDON (ICIS)--European polypropylene (PP) producers intend to increase prices in January but not all buyers are ready to accept them lying down, sources said on Wednesday.

Many also agree that it is too early to tell where PP prices will land this month.

The January propylene contract settled at €1,090/tonne FD (free delivered) NWE (northwest Europe), down by €13/tonne ($17/tonne) from its December level.

Some buyers expect this upstream price drop to affect January targets.

“If they offer me a rollover now, I’ll accept it but by next week I might have lost the spirit of good will and will be looking for a decrease by then,” said one buyer.

Producers are unlikely to concede a rollover in January, however, and those that were available for comment are still looking for a hefty price hike.

“We are looking for an €80/tonne increase for new business,” said one major producer.

Another is looking for a €75/tonne rise.

Business is expected to be slow to start in January. Many players will not be back in the market before 7 January and strong buying in December means that some stock will have built up at the converter level.

Production has been cut back significantly, with cracker and polymer rates running at an estimated 70-75% at the end of 2012, and output will remain reduced during 2013 as demand is expected to be flat and crackers will undergo a heavy maintenance programme.

Homopolymer injection spot prices were trading around €1,250/tonne FD NWE in December, and there are no signs of much change so far in 2013. Monthly prices decreased in December, however, and it is these prices that producers aim to lift.

Sources are expecting a difficult 2013 and several expect to see the same volatility that was a feature of 2012.

“Prices will probably go up in January,” said another PP buyer, “but it remains to be seen how long they will stay up.”

Naphtha, a driver of propylene and PP prices, dipped to $936-938/tonne CIF (cost insurance freight) NWE on Wednesday, but prices remain relatively robust and producers complain that these high costs are putting their own margins under pressure.

Most monthly PP pricing discussions are expected to get underway by next week.

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

($1 = €0.76)

By: Linda Naylor
+44 20 8652 3214

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