Price and market trends: European players see broadly stable June polyols prices

06 June 2014 10:07 Source:ICIS Chemical Business

Producers aim for rollovers or small increases if feedstock propylene prices increase

European polyols players are generally expecting stable prices going into June, reflecting a well-supplied market and seasonally softer flexible polyol demand in summer, although sellers are complaining of thin margins and the need to raise prices following months of feedstock cost increases, sources said on 28 May.

Several sellers indicated initial June targets of rollovers ahead of the June feedstock propylene settlement. Rollover targets were confirmed by several buyers, although no deals have been confirmed yet.

“We’ve seen increases since November of about €70/tonne, but polyols have not moved,” a seller said.

“June looks like a rollover. June/July are usually months when it is hard to increase prices unless raw materials really go up. Increases are necessary, but probably won’t take place,” the seller added.

It noted, however: “We’re digging our heels in if propylene goes up. We will either rollover or go up.”

The June propylene contract settlement was confirmed on 28 May at an increase of €10/tonne from May to €1,160/tonne.

Most sellers indicated that rollovers appear to be likely for June but complained that margins are thin. One seller said that it will be looking to raise prices by at least €30/tonne in June to recover lost margin.

“To be honest, in our case, we are looking for lost margin in the last few months. Propylene has gone up month after month and we didn’t increase prices. We still have to recover €30/tonne in margin. On top of that, of course, if propylene goes up in June, the situation will be even worse. Our target is to recover what we lost in the last months. We haven’t closed deals yet, but fighting for increases. We are still fighting,” another seller said.

Other sellers indicated that June and July are traditionally months where demand for flexible polyols is seasonally softer, making it difficult to pass on cost increases. Furthermore, a small increase of €10/tonne is likely to be hard to pass on in a market considered by buyers and sellers to be balanced-to-long.

Flexible polyols buyers said that the market is getting longer due to weak demand for bedding and furniture as well as increasing volumes of imports from Asia and Eastern Europe. Furthermore, one source indicated that an absence of production reliability issues in Europe has kept the market well supplied. “We had some offers at rollover for June but not yet accepted this. We expect price stability generally. The market is becoming longer as demand is not good [bedding and furniture] and no plant reliability issues and some imports coming into northwest Europe from Asia and eastern Europe,” a buyer said.

The well-supplied market is keeping polyols prices stable, despite higher feedstock costs.

By Iain Packham