14 March 2013 11:55 [Source: ICIS news]
LONDON (ICIS)--Several polypropylene (PP) buyers in Europe are settling March higher than February but increases of €25-35/tonne ($32-45/tonne) are falling short of initial €55/tonne targets - in line with this month's increase in the propylene monomer contract, sources said on Thursday.
“I haven’t been able to get a rollover,” said one large PP buyer. “I’ve settled with two suppliers at plus €25 and plus €30[tonne].”
Others agreed and said they had accepted similar increases.
Demand is very flat, however, in spite of price increases, and producers say that Q1 demand is down from the same period in 2012. Some estimate volumes to be down by around 5%. Production has also been reduced in recent weeks, mainly because of unplanned propylene outages.
“Demand is not strong and we are adjusting our production rates in line with demand,” said one major PP producer.
Not all buyers have settled yet for the month, and some are still hoping they will manage to get a rollover.
“More and more conversations this week seem to be about doing deals for quarter two volume rather than March price increases,” said another hopeful PP buyer.
The spot market saw some activity early month and prices have been higher than February. Homopolymer injection net levels are around €1,230-1,250/tonne FD (free delivered) NWE (northwest Europe). In February the odd sale had dipped below €1,200/tonne FD NWE.
Already there is talk of more increases in April, as producers have not managed to hold on to margins with a rise of €55/tonne in the propylene contact price, and only around half this hike in the PP sector. Many sources do not expect better demand in April.
Upstream naphtha prices are also playing a role in expectations for April pricing.
Naphtha prices have been volatile in recent weeks but are trading lower than in February. On Thursday morning the low end of the naphtha traded range had dipped to $909/tonne CIF (cost, insurance and freight) NWE.
While propylene availability remains on the tight side, lower naphtha prices are also expected to be taken into account when the April propylene contract price is settled and producers will find it hard to increase PP prices against a flat monomer.
PP is used widely in the household goods and packaging sector and also in the automotive sector.
($1 = €0.77)
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