FocusEurope PP buyers find August hikes hard to resist

08 August 2013 12:49  [Source: ICIS news]

By Linda Naylor

EuroLONDON (ICIS)--Polypropylene (PP) buyers are finding price hikes hard to resist this month as producers target increases following the €50/tonne ($67/tonne) rise in the August propylene monomer contract, several said on Thursday.

“In the end I had to pay more than I would like,” said one buyer, who was settling his account before leaving for holiday. “I paid [increases of] €45-55/tonne.”

Buyers have been under strong pressure to accept the full propylene monomer increase of €50/tonne and even more in August, and pressure has been building as the month has progressed.

One large buyer which expected to be able to get away with an increase of only half the monomer this month was beginning to change its mind.

“I think it’ll be the full monomer [increase],” it said.

The August propylene monomer contract settled at €1,090/tonne FD (free delivered) NWE (northwest Europe).

Not all buyers were convinced they would be paying increases as high as €50/tonne, but for the moment there was no evidence of any flexibility from producers. Some buyers were still holding out for less than the full monomer hike.

Availability of PP has been tightened by production cutbacks, better-than-expected demand in recent weeks and limited imports. Some propylene issues have also led to reduction in output at some sites.

“There are no special offers,” said another buyer.

Some sources felt that the current steady demand was also down to the possibility of higher prices in September. Naphtha prices are still on the rise. On Thursday they were trading at $882-885/tonne tonne CIF (cost, insurance and freight), while at the end of June they were at $832-834/tonne CIF NWE. They rose to above $900/tonne CIF NWE during the week ending 12 July.

Part of the increase in the naphtha price has been offset by a stronger euro versus the dollar but the collapse in butadiene (BD) prices has impacted heavily on cracker margins.

Some buyers complain that PP prices have little to do with BD prices but producers nonetheless bring them into the calculation when considering monomer contracts.

Most sources agreed that it was too early to start thinking about September pricing, but those buyers with accounts that gave them some flexibility, with delayed increases, were planning to buy as much as they could in August, leading to expectations of a strong month in terms of volume.

Upstream players said offtake from PP producers was better than expected this month, supporting producers’ accounts that August was turning out to be a strong volume month, in spite of holidays throughout Europe.

Homopolymer injection spot prices are trading in the mid-to-high €1,200s/tonne FD NWE on a net basis.

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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