Europe PP demand good despite August contracted price drop

By Linda Naylor

LONDON (ICIS)–European polypropylene (PP) contracted prices have fallen in August, for the first time in many months, but producers note good demand in spite of the summer season, sources said on Friday.

The August propylene contract fell by €20/tonne, and most buyers are targeting the same sort of decrease for August PP, with several producers admitting it has been difficult not to transfer the propylene drop to the PP market.

Some are still trying to limit the price drop to €15/tonne, however.

“Underlying demand remains healthy…customers have poor inventories,” said one producer.

“We tried to limit the decrease to €15/tonne, but €20/tonne is most likely now,” said another.

“The maximum price decrease we will give is monomer [€20/tonne],” said a third.

Spot prices have fallen more than prices in contracted business, and activity in Europe is very quiet, affected by holidays.

Homopolymer injection spot prices have dipped below €1,300/tonne FD (free delivered) NWE (northwest Europe) in some cases, on a net basis, down by around €30/tonne. Spot activity is very patchy and scarce at the moment, as many markets have fully embraced holiday mode.

A couple of producers have said they are pleasantly surprised by the level of demand in the PP market for August.

Buyers are not building any stock for September, however, as most expect lower prices next month.

Expectations of lower September prices are based on the recent crash in crude oil and naphtha prices that sources said will have to be passed on to the propylene and PP sector.

Naphtha closed the day at $852-856/tonne CIF (cost insurance freight) NWE on Thursday, and Brent crude at $102.87/bbl.

As recently as the week ending 27 June, naphtha had traded as high as $975/tonne CIF NWE.

Propylene is fairly well balanced, but PP sources expect a drop based on lower feedstocks.

The PP market is fairly well balanced. Imports are not as frequently available as in former years, and traders are finding it hard to get hold of imports at workable price levels.

PP is used widely in the manufacture of household goods, packaging and also in the automotive industry.