Europe PP buyers push for more than monomer drop in August

LONDON (ICIS)–Polypropylene (PP) buyers in Europe are targeting a price decrease of more than the €80/tonne drop in the August propylene contract, and it looks as though it might not to be too difficult, said market sources on Friday.

Sellers seemed to be starting the month of August considering a price decrease in line with the monomer drop, but buyers were targeting more.

The spread between propylene and PP has been increasing steadily over recent months, giving producers strong margins.

“I know I am going to get monomer [down €80/tonne],” said one large buyer, “but I want beyond monomer.”

Some producers acknowledged that prices could slip by more than the fall in monomer, and one said it would be offering more than the monomer from the outset.

“The curve can’t always be climbing,” said one.

Spot PP prices have been falling fast, leading to some buyers delaying purchases until prices fall further.

“I’ve been offered spot at €1,260 [tonne delivered] this week but I’m not buying,” said one buyer. “It will be lower soon.”

Levels of €1,250/tonne FD (free delivered) NWE (northwest Europe) were traded for commodity homopolymer injection grades earlier this week, before the settlement of the August propylene contract, but once the minus €80/tonne was out in the market, activity slowed down, and lower prices were heard by Friday.

Despite these numbers that most sources considered to be low, they are coming down from a high level.

“The spot price was out of all context,” said another producer. “Prices are now realigning in Europe.”

Supply of PP in Europe is no longer extremely tight, said sources, but nor is it long, and demand is relatively good, said several sources.

Most PP business in August is expected to settle early, as holidays take hold in the south of Europe in particular.

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

Focus article by Linda Naylor