NPE '18: PP prices in Latin America stable amid tight supply

Source: ICIS News

2018/05/07

HOUSTON (ICIS)--Polypropylene (PP) markets in Latin America appear to be stabilising despite lower feedstock prices in recent contract settlements.

Heading into this year’s National Plastics Exposition (NPE), PP buyers are still looking for discounts after months of rising prices. PP markets have been more balanced than polyethylene (PE) markets have, but the propylene contracts in the US Gulf, the benchmark for the region, have lost 13 cents/lb ($287/tonne) during the February-to-April period.

Despite lower feedstock prices, US PP export prices have not gone down by much, mostly because of tight inventories in the US Gulf. In many cases, prices heard have been theoretical because no material changed hands.

Offers of Asian material are coming at lower levels, but the shipments have not been for prompt arrival.

Prices have remained steady in April for Latin America, with the exception of Argentina, where the local producer reduced prices by about $100/tonne.

Some transactions made in the Pacific coast of South America have occurred at a slight discount to address competitive situations, but prices have not declined any further.

In Brazil, the local producer kept PP prices steady in April and is yet to reveal pricing policy for May.

Summer demand in the southern hemisphere is giving way to a sluggish fall demand affected by the specific circumstances of each economy and by price-hike fatigue.

Transformers are having difficulties transferring higher costs to end users, and financial costs are mounting with payment terms that go beyond 90 days.

This scenario is frequently found in countries like Chile or Argentina. Mexico has been able to maintain prices of late, but there are no enough indications about May pricing.

It is not clear how much product will be available for exports at the US Gulf during May.  Propylene inventories are growing, and this reflects on the declining spot deals done in the area.

Low spot prices for propylene have had an impact on PP contracts, which market participants negotiate frequently as an adder to propylene prices.

PP markets are not long in the region, suggesting that prices could stay close to current levels in the near term.

High import tariffs protect prices in places like Argentina or Brazil, and for this reason, the changes in those countries are expected to be small and likely based on specific economic conditions on each country.

Prices in the Pacific Coast, where import tariffs are low or none existent, are in the range of $1,400-1,450/tonne with little chance of coming further down in May.

F0FED58076DE55B9B61FC91E533DBD47.jpgPropylene prices have declined of late with lower feedstock prices. However, tight supply has limited the decline.

Sponsored by the Plastics Industry Association (PLASTICS), NPE2018: The Plastics Show takes place on 7-11 May in Orlando, Florida.