Europe PP buyers watch propylene eagerly as September looms

LONDON (ICIS)–Polypropylene (PP) buyers in Europe are keeping a close eye on propylene as monthly September monomer talks approach, sources said on Wednesday.

Spot propylene prices in Europe have steadied at a high level on the back of tight supply and strong demand and, at the coast, polymer grade prices have generally been indicated at contract price plus 10-12%, while inland, a wider range of pricing ideas has been heard – between plus 7-8%, down to minus 3%.

That propylene supply in Europe remains as tight as it is, is cause for some surprise amongst players, many of whom had anticipated a loosening of supply by now – especially since imports from Brazil and the US were arriving this month.

However, at least one cracker is heard to be struggling to achieve full and stable production following its shutdown because of the French strikes in June, and other planned and unplanned issues here and there have all been contributory factors.

Many PP buyers are still on holiday, and are unaware of the tightness in the upstream market.

“They will be surprised when they get back,” said a producer.

Others were hearing horror stories of three-digit increases, but these were largely being dismissed by most players.

Upstream costs were actually down in August in euro terms, in spite of the firming of US dollar-based crude oil and naphtha, but spot prices were high, and some PP production in Europe was said to be curtailed for lack of monomer supply.

One producer described its August demand as the “best ever.”

A buyer agreed: “Stuff is flying out of the door,” it said.

Inventories with producers were also low, according to several sources, lower than in 2015, according to recent figures, when shortages hit the market.

There was no suggestion that PP shortages were on the horizon for September, but buyers said some sellers had told them they would be eying more margin improvement next month.

PP margins have eased in recent weeks, as the spread between monomer and polymer has decreased.

September PP prices will become clearer once the new propylene contract settles for September.

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

Focus article by Linda Naylor

Additional reporting by Nel Weddle