Europe PP spot prices rise as sentiment shifts on higher costs, tighter supply

Source: ICIS News

2018/05/25

LONDON (ICIS)--European polypropylene (PP) spot prices are increasing as market sentiment shifts on the back of higher upstream costs and the lack of cheap spot imported product.

Sources are aware of the recent spike in crude and naphtha prices, which has left naphtha costs around €60/tonne higher than when the May propylene contract settled.

Propylene is not long, and everything is pointing one way for when the new June contract settles in the coming days.

“Let’s say there is some nervousness. Some people are asking to get one truck more here and there,” said a PP distributor.

Others described a stronger intent to buy.

“PP demand is picking up. They [buyers] are coming back, but the major issue is the lack of product,” said a trader.

Trading sources said it was difficult to find material at prices that were workable with the low prices, that are now disappearing from the market.

A reseller spoke of sentiment in the market changing, with both the dollar exchange rate and the lack of stocks influencing buying decisions.

"Buyers have  avoided buying so much in the last few months and have been using their own stock, but now they need to buy something,” it said.

“They can no longer buy from traders, because they [traders] can no longer buy at workable prices.”

Supply was not such a problem in the contracted market, and local producers continued to produce most grades at normal output levels, with some tightness in the random copolymer market.

The spot market was beginning to give the lead to what many players expected for the month of June.

The gap between monomer and polymer has been drifting down for some time now.

The May propylene contract rose by €25/tonne, but PP producers were only able to recover an average of around €10/tonne, so sellers are expected to take full advantage of the balanced-to-tight monomer and polymer situation to redress the balance.

PP buyers were aware of the upstream situation, but it was too early to tell whether they would be able to resist the determination of June sellers.

There may not be any particular shortages, but there is also no length, and costs are high, and spot imports lower in volume and more expensive.

“South Korean [material] is no longer interesting,” said a buyer. “I’ve been offered 1,240 [€/tonne delivered] for homopolymer.”

This represented a good €100/tonne increase over former deliveries, said the buyer.

Not all spot prices have reached such a level, but claims of prices below €1,100/tonne are met with scepticism.Crude oil prices rocket

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

Pictured: Food in plastic packaging, one of PP's end markets
Source: Food and Drink/REX/Shutterstock

Focus article by Linda Naylor