Europe PP market balanced but all eyes on August propylene

LONDON (ICIS)–The polypropylene (PP) market in Europe is balanced, but activity has tailed off towards the end of the month as buyers try to second guess August prices ahead of the propylene contract settlement, sources said on Friday.

“Nobody is buying, but nobody is offering,” said one PP distributor.

“It’s quiet,” said another. “There is no pressure for customers to buy, and no pressure from producers to sell. Nobody wants to buy extra volumes.”

A spot buyer said it had been offered lower prices, and there had been a noticeable improvement in availability in the last 10 days.

“I am being offered product directly from producers and also via traders,” it said, though prices were still on the high side, at €1,370-1,380/tonne FD (free delivered) NWE (northwest Europe) on a net basis for copolymer.

At such levels, there is no great hurry to buy, as the holidays are approaching and some sources expect August prices to dip.

July monthly prices have increased by €20/tonne on average, and most sources are now watching upstream movements with interest.

A couple of PP producers have said they expect a rollover to a limited decrease in the August contract, in spite of the recent weakness of the spot propylene sector. This was beginning to balance, however, and upstream naphtha costs have been below those when the July contract settled, but not significantly so, according to producers.

Naphtha closed at $926-929/tonne CIF (cost insurance & freight) NWE on Thursday, and traded in a range of $934-939.50/tonne last week.

PP supply was very tight in May, as propylene availability problems hit supply hard, but since then the balance has improved.

Imports have been fewer in 2014, but this too was balancing out by May. Most imports are said to be regular volumes brought in by Middle Eastern suppliers that also have production in Europe, and offers to traders remain too high to work for the most part.

Figures out this week showed little change for May, from the same month last year, but there have been fewer imports in 2014 following the imposition of higher duties from Gulf Cooperation Council (GCC) countries on 1 January 2014, when duties were increased from 3% to 6.5%.

A sharp increase in imported volumes at the end of 2013 made up for the reduction in 2014, however.

Export activity has also been down in 2014.

Even if some sources expect PP pricing to ease in August, no significant change is expected under current circumstances, and PP has been relatively stable so far throughout 2014.

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