Europe PP spot activity low in tight market

LONDON (ICIS)–Polypropylene (PP) spot activity has been almost non-existent in recent days, sources said on Wednesday, and prices are difficult to gauge.

“Demand is low, and there aren’t many calls,” said a distributor, “but anybody looking for material just can’t find it.”

“Traders either don’t have the material or they are waiting to sell it next month,” he continued.

Most PP activity in Europe in November has been limited to contracted volumes, and some 2015 contracts have been very advantageous to buyers, leading some sellers thinking that at least part of the strong demand seen in November has been down to a certain amount of stock building at low prices.

Buyers of material at 2015 low prices are under very strong pressure to accept higher levels next year, and some of them confirmed that to secure volumes next year they had to accept worse payment conditions.

Some sources complained that under new payment terms European converters could become uncompetitive globally.

PP prices in Asia have been falling rapidly and now homopolymer injection levels have dropped below $900/tonne CFR in some cases.

The low-end spot levels seen in Europe mid-November were just below €1,100/tonne FD (free delivered) NWE (northwest Europe).

It was not clear where December levels would land, but contracted volumes from producers were still very attractive to many buyers.

One PP producer said for imports to work between Asia and Europe, there would need to be a gap of $200-250/tonne, to account for transport, costs and a 6.5% import duty.

The weak euro means is affecting imports into Europe.

“I booked some material last month and it’s not a good price any more,” said a trader. “The exchange rate is closing trade.”

Most PP sources are now waiting for the settlement of the December propylene contract to determine where prices might land in the polymer sector.

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

Focus article by Linda Naylor