PP buyers in UK assured of October volumes by INEOS

24 October 2013 12:10  [Source: ICIS news]

LONDON (ICIS)--Polypropylene (PP) buyers in the UK have been assured of October deliveries, several said on Thursday.

“At the moment it’s business as usual,” said one buyer. “They’ve confirmed [delivery] next week and the first week of November.”

The buyer was concerned that its end-year volume rebate could be jeopardised, however, if volumes were not available beyond that. Many polymer buyers concentrate on doing business with their regular suppliers in the fourth quarter as they target their pre-arranged quantities, which gives them an extra discount on volumes purchased throughout the entire year.

Some buyers were also concerned that other producers would take advantage of potential production shortfalls from INEOS as they sought to cover volumes elsewhere.

“We have been actively looking for new customers,” said one producer, and some sources wondered what effect the current situation would have on INEOS’s business relations with its regular customers.

“This kind of behaviour is very unusual in this business,” said another UK customer.

Buyers in mainland Europe are not showing much concern over events in Grangemouth and are still finishing off October negotiations and looking forward to November.

“Our demand is not great, and we are looking for another decrease in November,” said a large buyer.

PP prices have fallen by €40-50/tonne in October, following a €35/tonne drop in the October propylene contract price. Spot homopolymer injection prices are trading around the €1,200/tonne FD (free delivered) NWE (northwest Europe) mark.

UK market sources were cautiously optimistic that petrochemicals production at Grangemouth, which also includes a C6 hexene based linear low density polyethylene (LLDPE) plant, will resume output following its closure on 15 October. There was more buyer concern over PP supply than over LLDPE supply.

Trade body Unite confirmed on Thursday that it has re-entered talks with INEOS in a bid to save jobs at Grangemouth. INEOS said on Wednesday that the site would remain closed and liquidators called in.

According to INEOS, the site needs £300m (€411m, $484m) of investment, along with a £9m grant from the Scottish government and a £125m loan guarantee from the UK government for the construction of gas terminal infrastructure to allow the import of shale-derived ethane. The UK treasury pre-qualified the project for loan guarantees on 22 October.

($1 = €0.73)

By: Linda Naylor
+44 20 8652 3214

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