Europe PP spot prices up as market tightens, buyers still cautious

LONDON (ICIS)–Polypropylene (PP) spot prices are firming in Europe this week on certain product grade tightness, but signs from the market have been contradictory, sources said on Wednesday.

“It’s physically tight on PP but underlying raw material is weak,” said one observer.

“I paid €20/tonne more this week than last,” said a buyer, “but I’m not convinced that the market is turning.”

There was a certain amount of caution from buyers who had witnessed sharp price hikes earlier in 2015 as buyers came to the market at what they perceived to be at the bottom. A series of unplanned outages spiked pricing further and shortages were felt by many buyers.

Some grades have tightened in supply in October, and some producers have sold out quickly, having dropped prices sharply at the beginning of the month.

“In the past 24 hours all special offers have stopped,” said a compounder.

“There’s a decent tone in the market in the last couple of days,” said a trader, “but there’s still a wide price range out there.”

Many PP buyers have propylene-linked contracts, and as such have been advantaged over many other buyers during 2015. Some sources saw the link between the varied PP pricing mechanisms moving back into line in October following the €110/tonne drop in the propylene monomer contract.

Propylene remains weak, however, and while spot activity is non-existent this week, one observer conjectured that the November propylene contract could fall by €50/tonne, but many players in the PP sector are now looking at supply and demand rather than propylene.

Propylene-linked PP contracts would clearly be affected by any downward move in the November monomer contract.

On the other hand, this week’s firming of crude oil and naphtha are also having an effect on sentiment in the PP market.

These contradictions were leading to caution from buyers.

“Is it the moment to destock or not?” asked another buyer.

Producers were seeing steady demand and some were able to retain a few euros from the €110/tonne monomer drop.

“It will be clearer next week,” said one, when the level of demand for the month is fully known.

Homopolymer injection PP spot prices are trading in the low-to-mid €1,000s/tonne FD (free delivered) NWE (northwest Europe).

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

Focus article by Linda Naylor