Europe polypropylene ‘already tight’ for April allocations

Focus article by Linda Naylor

LONDON (ICIS)–Polypropylene (PP) availability in Europe is tight, with one major producer saying its allocations are already sold for April, sources said on Monday.

“We are seeing an incredibly strong market situation,” said the producer. “Customers are ordering at an incredibly strong rate and April volumes are already committed.”

Several buyers said they had been informed by another producer that it would be targeting an increase of €120/tonne for April business, and this producer also said it had already closed allocations for April.

A distributor saw a similar situation.

“Everybody is asking for material,” it said. “When I tell them we have nothing to spare for April, they say send it for May.”

The PP market was already balanced to tight and stocks were low before some cases of force majeure (FM) made the situation worse, with Borealis’s Schwechat FM from Austria last week hitting sentiment hard.

LyondellBasell had already declared FM on PP from its Tarragona site in Spain earlier in March, and Polychim declared FM on PP on 10 March. LyondellBasell’s problems at Ferrara, Italy, and Tarragona are thought to be coming to an end but stocks are thought to be very low at these sites. LyondellBasell did not comment on its production facilities.

“It’s quite an unusual situation,” said a large buyer. “April will also be strong for them [producers]. There are no imports and demand is good. The oil price is one thing, product shortage is another.”

Spot PP prices have soared in recent days, but buyers with propylene-linked contracts remain at an advantage over those with freely-negotiated contracts.

Some sellers were not expected to push for maximum hikes in April, as this would create massive disparities in pricing between monomer-linked pricing and freely-negotiated pricing, but further margin improvement was widely expected to take place again for producers in April.

The April propylene monomer contract is expected to show a limited increase, in spite of price erosion in the upstream dollar-based crude and naphtha markets, as the weak euro has meant an increase in costs in euro terms.

The supply/demand situation in the PP market is expected to eclipse the movement in the new propylene contract, which is expected to settle in the coming days.

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