Europe PP spot offered at lowest level in over six years

Linda Naylor

11-Feb-2016

LONDON (ICIS)–Spot offers of some polypropylene (PP) grades are being made into Europe at the lowest levels since July 2009, sources said on Thursday.

Buyers said they have been offered imports of South Korean homopolymer in the mid-€800s/tonne DDP (delivered duty paid) – some for delivery at the beginning of March, but some said to be available for prompt delivery, although several sources questioned whether this was the case.

“I’m not sure that this sort of price is available for prompt delivery,” said one player. “It’s more like a March price to me.”

Landed product had been available at €920-950/tonne earlier in the month, and some sellers were still able to sell above €900/tonne, they said.

“For regular business we can still sell above €900 [/tonne DDP],” said one.

The last time such levels were seen in Europe were in July 2009. Brent crude oil was trading around the $69/bbl at the time, while on Thursday, Brent crude was trading just above $30/bbl.

Against the backdrop of falling PP spot prices, monthly prices are moving more slowly, following the settlement of February’s monthly propylene contract at €560/tonne FD (free delivered) NWE (northwest Europe), down by €60/tonne from its January level.

In July 2009, the propylene contract stood at €650/tonne FD NWE.

Distributors and traders said some lower spot offers were also available from local European suppliers, but that the grade slate was very limited, and some PP grades were simply not available at all.

European PP suppliers are very relaxed, even with the current spate of low-priced imports on offer.

“We’re in pretty good shape,” said a producer. “…How long will imports be around?”

Another producer said: “We are seeing more imports, but it’s not dramatic.”

Some sources were convinced that imports would disappear once Asian markets returned from holiday, and that Asian prices had bottomed out and would rally.

Crude oil and naphtha prices have slipped again this week, however, and naphtha closed the day on Wednesday not far from $260/tonne CIF (cost insurance freight) NWE.

Many sources said they were unclear over what would happen next, and there was still some concern that a repeat of 2015 could send product tightening and prices spiralling up, countered by the fear of buying too much stock in a market that could fall further.

A couple of major planned shutdowns in Europe wold maintain a certain balance, said sources, and current speculation over March monomer was for a rollover, give or take a few euros.

Supply and demand in the European propylene market has re-balanced for the most part, said sources in the monomer market.

One player summed up the situation thus:

“I’m suffering. I don’t understand, and when I don’t understand, I suffer.”

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

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