Europe PP buyers expect relief in June as propylene rises

Linda Naylor

27-May-2016

Chemical officials wonder what US is up to with IST planLONDON (ICIS)–Polypropylene (PP) buyers in Europe are wondering what they will be faced with now that the June propylene contract has been settled up, several said on Friday.

The June propylene contract is now fully settled at €652.50/tonne, up by €17.50/tonne, after some uncertainty.

PP demand is slow, slower than many expected, and the strong growth of recent months is now considered to be partially down to stock building.

“The market appears to have gone long quickly,” said one buyer.

Some sources thought that inventories along the chain were higher, and concerns over working capital were leading to destocking.

Many buyers had bought more than they needed following the short supply situation of 2015, which led to line closures, and they were now more relaxed, in spite of force majeures from France, where strikes were affecting supply.

In recent months, PP prices have been moving in line with the propylene contract, and more in many cases, leaving a strong spread between propylene and PP. Buyers now felt they had the chance to reverse this trend and expected to be able reduce this spread.

The above chart shows the spread between ICIS FD (free delivered) EU low-end PP homopolymer injection gross numbers compared with the prevailing propylene contract.

It is this spread that buyers expect to be able to nibble away at in June.

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

Top image: REX/Shutterstock

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