Europe PP spot prices among lowest in the world

LONDON (ICIS)–Polypropylene (PP) spot prices are among the lowest in the world, if not the lowest, ICIS data showed on Friday.

Rising prices in Asia, coupled with falling levels in Europe have led to the unusual situation of European levels being below those in Asia.

The above chart shows PP spot prices in Asia, China, Turkey and Europe. European prices are given on a delivered basis, the others are on a cost and freight (CFR) basis.

Spot homopolymer prices have dipped below €900/tonne FD (free delivered) NWE (northwest Europe) this week, but most spot business was still above €900/tonne, according to most sources.

They agreed that below €900/tonne was available only at very large accounts.

While much spot business is still done by European sellers, most imported product would be subject to import duty of 6.5%, and includes delivery, unlike CFR prices.

Low spot prices are leading to expectations of fewer imports into Europe as Middle Eastern and Asian sellers can get better netbacks from other regions.

Some sources believe this phenomenon will begin to affect the market by September.

On the other hand, the spread between monomer and polymer is still wide, in spite of recent erosion, and production is running high, when propylene is available.

Contracted PP numbers in Europe are above spot levels, and most business is done under contract.

2016 has seen producer margins approach reinvestment levels according to some sources, but the recent easing, and also the uncertainty of upstream costs means that margins would have to be consistent for much longer than the few months seen in 2016, for any new investment to be considered in Europe.

A fly in the ointment for sellers that expected a significant improvement in September pricing is the fact that there were signs that Asia prices were beginning to falter.

Asian prices were largely stable earlier in the week, but started softening on lower-priced US cargoes being offered competitively against other origins from India and Middle East.

Players were expected to be watching global movements with interest.

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

Additional reporting by Johanna Truong