Europe PP sellers scent firming Sept market as crude flirts with $50/bbl

18 August 2016 12:45 Source:ICIS News

LONDON (ICIS)--Polypropylene (PP) buyers and sellers are speculating on September as they watch Brent crude move close to the $50/bbl level and propylene supply tighten, sources said on Thursday.

Spot propylene deals have been done above the current contract level of €670/tonne FD (free delivered) NWE (northwest Europe), but it was not yet clear where the new September propylene contract will land.

On Thursday Brent crude oil was back up, just a few cents short of $50/bbl, bringing naphtha up in its wake, to $391-392/tonne CIF (cost insurance freight) NWE.

Already, before crude and naphtha began to rally, PP sources were experiencing some tightness of certain grades in the spot market, and recent figures have revealed a tight stock position with suppliers, as some PP supply has been curtailed for lack of available propylene.

August PP demand has also been good.

“Underlying demand has been really strong,” said a producer. “This is the best August we have seen for some years.”

Spot PP prices rallied a little at the end of July/early August, and the lack of spot business since then has muddied the waters in terms of where September prices might trend, said sources, as many were still on holiday.

“The PP market is very much uncertain at present,” said a potential importer.

Several traders had said it was now difficult to get hold of fresh volumes at prices that work with end-July spot levels of around €900/tonne FD NWE, however, so new spot offers were expected to be higher when business resumed post holidays.

The lack of activity in August had left many sources uncertain.

“You need to act quickly,” said another potential importer. “In this market, when something is certain it’s too late to react.”

Some PP producers were already thinking they could resume the search for improved margins in September.

Some imported cargoes have already been bought and arrival is expected in the first half of September, however, and inventory levels with buyers are not clear.

Destocking through June and July is what could have led to a strong August, so buyers could be comfortable for September, said sources.

Most expected the situation to become clearer towards the end of August when players are back from holidays and the propylene price situation is better defined.

One thing is sure, though, few people expect lower prices next month.

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

Focus article by Linda Naylor

By Linda Naylor