FocusHigh propylene spot prices unsettling downstream PP market

25 January 2013 10:34  [Source: ICIS news]

By Linda Naylor

Price riseLONDON (ICIS)--High propylene spot prices are unsettling the downstream polypropylene (PP) market in Europe this month as the possibility of an increase in the February monomer contract looms, sources said on Friday.

“We are seeing definite signs of pre-buying this week, and I am going to take advantage of this and ask for higher prices for extra volumes,” said one PP producer.

PP buyers are cautious but have got wind of the current strength in the monomer sector. Most players in the PP sector understand that recent increases have been based entirely on upstream costs and production cutbacks rather than any fundamental strength in the market, but they are also aware that if propylene rises in February, producers will be targeting an increase in their market.

“I have seen a spectacular increase in demand in the second half of January,” said another producer. “It’s not only crackers that are running reduced but also FCC [fluid catalytic cracker] units that are running low.”

Plant cutbacks limiting propylene output, coupled with the recent unplanned outage of the Naphtachimie cracker in Lavera, France, has led to a spurt of propylene buying.

In spite of concerns over an increase in the February propylene contract price, any upward movement is so far not expected to be that great by most PP players.

“We expect anything between a rollover and plus €20-30/tonne ($27-40/tonne),” said another PP producer, commenting on expectations on the February propylene contract price.

“We think there may be an increase in February,” said a large PP buyer, “but we expect no more than we have seen in January, that is €20/tonne.”

“Our demand is not very strong and we just don’t need that much material.”

The spot PP market is not witnessing the upturn in demand that some PP sellers see, and some traders have even dropped their prices a little to entice buyers back to the market. Homopolymer injection net numbers are around €1,230-1,250/tonne FD (free delivered) NWE (northwest Europe), down by around €20/tonne from earlier in the month.

January PP prices have increased for contracted business, with an increase of €20-30/tonne fully confirmed, in spite of the €13/tonne drop in the January propylene contract price of €1,090/tonne FD NWE.

Spot propylene price ideas from sellers are now above the contract level, but buyers are loath to accept them.

PP producers and converters are hoping that 2013 will see less volatility than in 2012, when big price swings made business hard to manage.

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

($1 = €0.75)

By: Linda Naylor
+44 20 8652 3214

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