Price and market trends: Bullish Europe PP sellers target hikes in June on reduced output

14 June 2013 09:50  [Source: ICB]

Players target price and margin increases as feedstock costs increase and supply remains tight

Polypropylene (PP) buyers in June are facing higher prices but it is not clear how successful ­producers will be, following a bumper month of buying in May, sources said on 6 June.

The June propylene contract settled up by €15/tonne ($20/tonne), and there has been evidence of some acceptance of such an increase in the PP sector, but many buyers are attempting to delay settling early this month.

"I have had a few phone discussions but have agreed on nothing," said a large buyer. "The starting point for them is plus €50-70/tonne over May, but it's a bit early yet."

"Suppliers are asking me for an extra €30/tonne for June PP," said another.

One buyer had settled with one supplier at an increase of €20/tonne over May in the week ending June 9.

"I am trying to get plus €15/tonne from my other suppliers, in line with the monomer contract," it said.

"Producers are in a hurry to settle. Perhaps they expect demand to ease in the second half of the month," said another. "Maybe they'll get the propylene increase."

Naphtha was the focus of much attention as a main driver of propylene and PP pricing, and volatility has swayed opinion. On 6 June naphtha was trading at $847-849/tonne CIF (cost insurance & freight) NWE (northwest Europe). Earlier in the week naphtha had looked weaker but has since rallied. Spot PP sellers say business is steady and prices firm. Levels of €1,250/tonne FD NWE were being traded for homopolymer, from €1,120/tonne FD NWE in early May.

PP producers are bullish, and one said it is preparing to close order books for June this week, such has been the level of ­demand.

"We are experiencing good sales in June and are even able to lift the margin a little for the first time in a long time," it said.

All sources agree that price increases are based on reduced output that has been a feature of the market for many months, in line with soft demand. The upturn in May volumes led to a swift tightening of availability that some sellers expect to continue well into July.

PP is used widely in packaging and household goods and in the automotive sector.

By: Linda Naylor
+44 20 8652 3214

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