FocusEurope PP buyers look to August propylene for price direction

24 July 2013 11:40  [Source: ICIS news]

By Linda Naylor

DirectionLONDON (ICIS)--European polypropylene (PP) buyers are waiting for the settlement of the upstream August propylene contract to give direction to PP pricing next month, market sources said on Wednesday.

An increase is widely expected over the July monomer contract, which settled at €1,040/tonne ($1,368/tonne) FD (free delivered) NWE (northwest Europe), and ideas range from plus €30-100/tonne. The top end of this range is considered too high by most of the market, however.

PP producers are expected to target higher PP prices in line with any upward movement in the new contract, but reactions in the downstream sector are mixed.

“I think [an increase] will stifle demand and we will end up in a cycle of boom and bust,” said one buyer.

“Any activity won’t be so high in August,” said another, “even if [propylene] increases it won’t be easy to pass it on to the PP market.”

PP availability is not strong, however, and there have been pockets of tightness in July.

One of the buyers said it had had difficulty with supply this month.

“Problems were quite severe, but in the end we didn’t stop the machines,” it said.

On the whole, however, despite of talk of tightness here and there, buyers have been able to get all the material they needed this month.

August sales volumes are expected to fall as converters close for the summer, and while some buyers do not expect to succumb to much upward pressure, nor do they expect PP prices to fall.

“Activity won’t be so high,” said one of the buyers, “and the main driver for increases is naphtha.”

Naphtha prices are trading at higher levels than in June – when the last propylene contract settled at a rollover – and only a sharp downward move in crude oil and naphtha prices could be expected to change this momentum for August monomers – and hence polymers.

On Wednesday morning naphtha was trading at $884-885/tonne CIF (cost insurance & freight) NWE. Naphtha prices were at $832-834/tonne CIF NWE during the week that the July propylene contract settled at a rollover from June.

July PP prices rose by €5-10/tonne in some cases, with homopolymer injection spot prices trading at €1,200-1,220/tonne FD NWE on a net basis.

A propylene contract settlement is expected in the coming days.

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

($1 = €0.76)

By: Linda Naylor
+44 20 8652 3214

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