Europe PP market eyes potential impact of lower crude prices

LONDON (ICIS)–Europe polypropylene (PP) buyers are under pressure to pay higher prices in both the spot and contract markets, even as crude and naphtha prices slip, several said on Friday.

The full extent of price hikes is not yet clear for the month, but increases up to as much as €90/tonne were mooted by some sellers. Others were looking for more modest increases, but very little was on offer at less than plus €60/tonne, said sources.

“We’re still trying to close [the month],” said one buyer. “There is not so much import around.”

Spot PP homopolymer injection prices have soared to a minimum of €1,200/tonne FD (free delivered) NWE (northwest Europe) in many cases, with only a few buyers able to get hold of volumes below this level.

“It’s more like 1,250 [€/tonne] than 1,200 now,” said another buyer.

Against this background of higher prices, however, lower crude and naphtha prices were having an impact on sentiment in Asia, which in turn had begun to affect buying activity in Turkey. Most PP business in Asia this week was done at a reduction to last week.

Many PP sources are wondering if lower crude and naphtha prices could have an immediate impact on PP pricing in Europe.

In spite of lower upstream crude prices, propylene supply remains very tight in Europe, and few producers are willing to offer PP at low rates when they are paying spot prices that are above contract to the tune of 20% in some cases.

With monomer supply so tight, many PP sources are expecting an upward move in the April contract in spite of the drop in naphtha pricing, several said.

The current planned cracker outages are having an impact on propylene – and hence PP – supply, and some production issues in Europe are also tightening supply.

LyondellBasell’s force majeure on all PP from its Brindisi, Italy, plant, remains in place. The force majeure was declared on 26 January.

Production issues in Spain are also said to be on-going.

Borouge’s PP production is also affected as a knock-on effect from a fire that broke out at the Abu Dhabi National Oil Company’s (ADNOC) refinery in Ruwais, Abu Dhabi, on 11 January, and propylene supply in Europe is also still affected by this, said some sources.

Against such a background, most PP sources expect April to be another strong month.

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