Europe PP buyers braced for higher March prices on propylene rise

Focus article by Linda Naylor

LONDON (ICIS)–European polypropylene (PP) buyers are bracing themselves for higher prices in March as all indications point towards an increase in the propylene contract, sources said on Friday.

A rally in crude oil and naphtha prices following their collapse has led to expectations of an increase of €50-100/tonne for the March monomer contract, said some PP sources.

Some spot buyers in February had already paid higher prices for their PP.

“Whatever we paid this month is less than we will have to pay next month,” said one buyer that was forced into the spot market by an unexpected production issue.

Most PP producers closed their order books for February earlier this month as demand rose on expectations of higher prices in March, and because inventories with buyers were low, demand was swift to return.

In February, propylene-linked accounts settled down in line with the €80/tonne drop in the propylene contract, while freely-negotiated buyers were largely unable to get such a decrease and had to be satisfied with leaving European producers with some margin improvement.

Several feared this could also be the case for March, as availability is tight and demand is good. There were already higher offers.

“If you want to buy now you have to pay €40/tonne more than last week,” said a potential buyer.

“€950/tonne is no longer in the market for homopolymer,” said a distributor, talking of net delivered prices. “It’s more like €1,000/tonne now.”

PP producers were expected to be targeting hikes at least in line with the propylene monomer contract increase in March.

“We will be looking for more margin improvement,” said one.

The March propylene monomer contract is expected to settle next week. It currently stands at €755/tonne FD (free delivered) NWE (northwest Europe).

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