Europe PP availability tightens, buyers face hikes

11 April 2014 13:06 Source:ICIS News

Focus article by Linda Naylor.

LONDON (ICIS)--Polypropylene (PP) buyers in Europe are under pressure to pay higher prices in April as availability tightens, but resistance is strong and the extent of increase depends largely on the starting-point of discussions, sources said on Friday.

“PP pricing has been a challenge this month,” admitted a large buyer. “I was hoping to get away with plus €10/tonne but for the moment my suppliers are still talking plus €25-30 [/tonne].”

Such an increase has not been commonly discussed, and several buyers said they have concluded the month at a €10/tonne increase, in line with the hike in the April propylene contract price.

“We started the month at plus €10/tonne,” said one producer, “but now we are at plus €20.”

Increases above €20/tonne were seen as rare, and were thought to be only offered at accounts where the price level was already very low.

A couple of copolymer buyers were still discussing monthly business below €1,300/tonne FD (free delivered) NWE (northwest Europe), but with regular homopolymer injection net pricing at €1,250-1,300/tonne this was clearly below market levels, and upward pressure at such accounts is strong.

PP availability has been tightening as the month has progressed, mainly on tight propylene and better-than-excepted demand.

“This is the strongest month on record for the second month in a row,” said a producer.

“Availability is not so good, it’s still quite tight,” said one large buyer. "Not so many spot opportunities, for big volumes at least, but so far we are fulfilling all our needs.”

“We are not stopping [producing] for Easter, but [our] raw material [stocks] are at the limit of being safe,” it added.

The market was still described as tight, with little excess supply, but not short.

A dearth of imports is contributing to the tightness in the PP market. An increase in duty from GCC countries, from 3% to 6.5% on 1 January 2014 meant that imports increased in volume at the end of 2013 and were sold into the European market in January and February, with availability dwindling into March. Some sources expected more imports by June, as Europe strengthens.

Several importers had found it hard to recover the 3.5 percentage point increase in duty, and preferred Asian destinations to European.

Many players are now focussing their attention on May, and where the next propylene contract might fall.

Spot propylene prices are talked above the contract, leading to expectations of a higher contract in May. Some sources have suggested that tightness in the propylene market could remain throughout 2104.

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

By Linda Naylor