Price and market trends: Europe PP players consider June pricing options in tight market

06 June 2014 10:07 Source:ICIS Chemical Business

Cracker production is still cut back throughout Europe, mainly to avoid oversupply in the ethylene and derivatives sector

Polypropylene (PP) players in Europe are looking at June pricing following the settlement of the June propylene contract at an increase of €10/tonne, sources said on 29 May.

The June propylene contract settled at €1,160/tonne FD (free delivered) NWE (northwest Europe), while May homopolymer injection PP prices were trading around €1,280-1,300/tonne FD NWE for much of May.

As most of Europe was on holiday on Thursday 29 May, there was muted reaction to the propylene contract, but one large PP producer said on 28 May that June prices could well be higher, given the continued tightness of PP in the market. “The [PP] market is still tight and we have seen good demand this month,” it said, adding that increases of €25-30/tonne were not uncommon in May, even though some prices rose only by €15/tonne.

PP availability has been tight on propylene issues at several sites, and both buyers and sellers see a market where June prices are likely to firm again.

“I expect them [producers] to be coming into the market for June with higher prices,” said a large buyer. “It’s tight, for sure, and they keep telling me it’s tight but I haven’t had any shortages so far.”

Several large buyers echo this sentiment, and real shortages were seen mainly in the biaxially oriented polypropylene (BOPP) sector in Italy, following propylene supply issues to LyondellBasell’s PP production from Versalis’s Brindisi cracker site in Italy in mid-April. The situation is now back to normal at this site.

Total Petrochemicals’ planned outage at Feluy in Belgium, Europe’s largest PP production site at 900,000 tonnes/year, is also having an impact on availability throughout Europe, according to market sources who said earlier propylene availability problems had left the producer with very low stocks. Total declined to comment on the status of its plants or inventory levels.

Imports of PP have also been down in Europe in 2014 since the increase of duties from GCC countries from 3% to 6.5% on 1 January this year.

Some players issued warnings over high prices currently traded in Europe. They suggested that peripheral buyers who could shift volumes to high density polyethylene (HDPE) injection would do so as PP prices were higher.

HDPE injection prices have moved up in May, from the low-€1,200s/tonne FD NWE to around €1,250/tonne, but it was not clear how much this was due to tightness in the PP sector, or Total’s Feluy outage, where HDPE is also produced. Sources said both were probably playing their part.

While buyers complain of high prices and the difficulty they have passing them on to their own markets, June pricing is unlikely to give them any relief. The stock position of most producers, and also many buyers, is low, leading to higher prices based on market fundamentals of supply and demand.

By Linda Naylor