Europe PP spot prices steady as players wait for new monomer CP

Focus article by Linda Naylor

LONDON (ICIS)–Polypropylene (PP) spot prices are steady, following some erosion in early August, and players in Europe are waiting to see where the new propylene contract for September settles to give direction to September PP pricing, sources said on Friday.

“Prices are holding to a level of €1,290-1,300/tonne,” said one trader, referring to homopolymer sales on a net basis. “They are not being affected by talk of lower monomer [prices].”

Prices were reported on a FD (free delivered) NWE (northwest Europe) basis.

Some sources saw that those price levels price levels already reflected any potential drop in the monomer contract for September. They started the month at €1,320-1,350/tonne  FD NWE.

Expectations for a reduction in the monomer contract next month are based mainly on a collapse in crude oil and naphtha prices.

“We are working on a reduction of €25/tonne down for September [propylene contract], between €20-40/tonne,” said one PP producer.

Another suggested the September propylene contract could fall by as much as €45/tonne.

The monomer contract is expected to settle next week, and monthly PP buyers will be pushing to recover any drop in September propylene.

August monthly PP pricing has fallen in August, largely in line with the €20/tonne drop in the August propylene monomer contract, and any drop in August propylene will be eagerly sought by buyers.

Net PP prices for monthly homopolymer injection are not dissimilar to spot pricing at the low end of the range, according to buyers.

Naphtha prices have fallen considerably in August. On Thursday evening they were assessed at $859-861/tonne CIF (cost insurance freight) NWE, trading as high as $941/tonne during the week ending 1 August.

Some PP sellers were encouraged by demand in August, saying sales were progressing nicely even during the second half of the month, while others were less bullish.

“Overall demand is where you would expect for August,” said another producer, “but we are being careful with stock and not rushing to sell.”

Some planned maintenance outages were expected to maintain balance in the PP market in the coming weeks, and imported material was still largely available in lower volumes.

“We are beginning to feel the effect of the change in the duty structure,” said the trader, who complained of not being able to get hold of material at a workable price level.

Import duties from GCC countries, among others, increased from 3% to 6.5% on 1 January 2014. While this had limited effect initially due to a surge in imports at the end of 2013 that took time to be absorbed into the market, alternatives to European supply have become scarcer as the year has progressed.

PP activity is expected to get back to normal next week as players return from holidays.

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