FocusEurope PP players watch upstream movements carefully

24 January 2014 11:21  [Source: ICIS news]

By Linda Naylor

PP bagsLONDON (ICIS)--Polypropylene (PP) prices have risen by more than the €20/tonne monomer increase in January, but they have fallen short of initial higher targets, and all eyes are now on February, sources admitted on Friday.

“We got higher increases early January,” said one major producer, “but it’s now fairly solid at plus €30/tonne.”

Demand has tailed off as the month has progressed and buyers’ stocks could have been higher than many had thought at the end of December. Many bought at the end of 2013 to be able reach end-year volume targets.

“I half expect buying to come back next week once buyers are aware of the naphtha situation,” said a distributor.

Some spot PP prices have eased this week, but the prospect of only a minor change in February’s propylene monomer contract is helping to maintain a cautious stability in this sector.

Naphtha pricing plays a large role in monomer settlements, but naphtha has been volatile this week, and a sharp downward move seen last week had abated somewhat by Friday. Crude oil rallied on Wednesday, lifting naphtha prices it its wake.

Naphtha closed at $904-906/tonne CIF (cost insurance freight) NWE (northwest Europe) on Monday 20 January, but has risen since, to close at $925-928/tonne on Thursday.

“The next five days [of naphtha pricing] will be crucial in determining monomer prices for February,” said another producer.

Propylene supply is tight, and this could mean that a reduction of the average naphtha price throughout the month may not have a significant impact on the February contract price.

Many PP players expect PP to follow propylene, as has been the case in past months.

No significant price drop is expected, however. On Friday players were looking at between a rollover and €20/tonne decrease for February propylene.

“There are no fundamentals to support a drop in margin in February,” said one of the producers.

PP spot homopolymer injection prices are trading in a wide range, with some low business still said to be done at €1,220/tonne FD (free delivered) NWE, but levels of €1,250-1,260/tonne are also still valid.

The February propylene contract is expected to settle next week.

By: Linda Naylor
+44 20 8652 3214

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