Europe PP buyers face hikes, amount disputed

08 May 2014 13:13 Source:ICIS News

Focus article by Linda Naylor.

LONDON (ICIS)--Polypropylene (PP) buyers in Europe are facing hikes in May, but the differing price expectations of producers has led to confusion over the size of the increase, market sources said on Thursday.

“I have got plus €10/tonne for one [PP] grade,” said one buyer, “but another supplier is looking for plus €25-30/tonne.”

“It’s early yet,” said a producer, “but we are getting some increases of €35/tonne.”

Some buyers are delaying purchases to get a better idea of the price direction for the month, but producers’ stocks are low and most are in no hurry to sell.

“Some customers are refusing to pay our increases, but there isn’t much alternative supply available,” said one producer. “We are tight, we don’t need to sell low.”

A spot PP buyer that has had success in getting hold of some polyethylene (PE) volumes at a very attractive price, agreed it was not easy to get hold of PP at workable levels.

“I’m really juggling to get all I need,” it said. “We are not seeing any imports, but we were expecting the PP guys [producers] to be looking for bigger increases given the circumstances.

Net homopolymer injection prices were said to be trading around €1,280/tonne FD (free delivered) NWE (northwest Europe) minimum. Prices were at €1,220/tonne in early March and have risen steadily since.

PP has tightened considerably over the past weeks as propylene availability issues have impacted output. Some imports of Asian propylene are due in Europe in May but this product is already committed, and PP players do not expect it to have much impact on pricing.

Propylene spot remains firm, around the level of contract. The May monomer contract rose by €10/tonne, and it is this monomer increase that many PP buyers are aiming to get in their PP prices for May.

The situation is complicated by the number of propylene-linked deals in the European PP sector. Those buyers who have this link applied to their PP pricing will be seeing a €10/tonne hike in May prices.

Some sellers do not see a problem with this, and at least one was offering big hikes to calm buying interest as its stocks were too low to cope with demand.

Others were approaching the market with more moderation, to be able to maintain an element of stability that has been absent from the PP market for some years. Early 2014 saw a period of stability not seen for some time.

PP producers are fairly relaxed for the market in the weeks to come as propylene is expected to remain tight as long as crackers are reduced to prevent oversupply in the PE sector.

By Linda Naylor