FocusWeak Europe PP demand limiting price hikes as costs soar

08 February 2013 10:51  [Source: ICIS news]

By Linda Naylor

PolypropyleneLONDON (ICIS)--Weak polypropylene (PP) demand is limiting the price hikes that producers are targeting in February, market sources said on Friday.

“The market is absolutely terrible,” said one seller. “Demand is lousy.”

The February propylene contract price rose by €10/tonne ($13/tonne), settling at €1,100/tonne FD (free delivered) NWE (northwest Europe) and there is some confirmation from low-priced PP accounts in Europe that they have accepted a €10/tonne increase in February.

Spot prices, however, have taken a different course, and lower levels have been recorded this week as traders try to entice buyers to the market.

Net copolymer prices have been reported in the mid €1,200s/tonne FD NWE and buyers say there is ample availability for such product. Homopolymer prices are languishing in a similar price range.

In spite of the lacklustre mood in the European PP market at present, there are pockets of tightness, mainly because of propylene shortages caused by unplanned outages upstream.

“We are not unaware of difficulties with one of our suppliers,” said a large PP buyer; “but we have managed to get all we need by rescheduling deliveries.”

“I have had no difficulty with supply,” said another buyer. “I couldn’t get away without paying a €10/tonne increase, but I have all I need.”

Rollover pricing is reported at higher-priced accounts, and upward pressure seems to be more prevalent at those accounts where net levels are sometimes below traded spot prices.

“I have rolled over my prices from January,” said a third buyer; “and I am able to buy as much as I need on the spot market.”

One producer argued that increases were going through at a brisker pace.

“We are doing freely-negotiated contracts at plus €20-30/tonne over January,” it said.

Another expected to be able to force through a €20/tonne increase as its availability was low in some grades.

All this comes at a time when feedstock costs are soaring, adding pressure to producers’ squeezed margins.

On Friday morning, naphtha was trading above $1,000/tonne CIF (cost insurance freight) NWE, when at one point in January it dipped briefly below $900/tonne CIF NWE. Brent crude oil was trading at $117.68/bbl on Friday morning.

Under these circumstances a price crash cannot realistically be expected, but production will have to remain cut back if demand does not improve.

PP is used widely in the packaging and household goods sectors, and also in the automotive industry.

($1 = €0.75)

By: Linda Naylor
+44 20 8652 3214

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