Europe PP activity slows as buyers eye erosion but sellers are confident

21 April 2017 11:29 Source:ICIS News

Focus article by Linda Naylor

LONDON (ICIS)--Polypropylene (PP) spot activity in Europe has come to an abrupt halt for many this week as some buyers eye lower prices in May but producers remain largely confident, sources said on Friday.

April monthly contracted prices have increased, and even those buyers that have not settled the month yet are expecting to pay higher prices.

“We hope to get away with the propylene [contract increase of €15/tonne],” said one such buyer. “There is pressure for more, but I don’t think we will have to pay it.”

In contrast, another large buyer said it was unable to get just a €15/tonne increase in April.

“We have some freely negotiated business, and there is no question that you pay a premium,” it said. “For fractional melt flow index rates, such as 0.3-0.6, we have paid plus 30 [€/tonne].”

Commodity business was generally being done at around plus €20/tonne, agreed many sources.

Spot activity was where a slowdown was noticed most, said sources, and offers of off-spec material were getting lower and lower, they said.

“I’ve been offered copolymer high melt flow rate material at more than €100/tonne less than two weeks ago,” said one buyer.

Prime material offered via official sales channels was still being offered at the same price as at the beginning of the month, however.

Sources were watching upstream price movements carefully, and buying PP very cautiously, using stock built in the first quarter of 2017, when many buyers feared a potential supply shortage as planned cracker maintenance outages got under way.

Crackers were now on the point of coming back on stream, and spot propylene prices were softening. There was so far no clear indication for the new May propylene contract, but few PP sources expected an upturn in price.

Against this backdrop, PP buyers were expecting to be able to get at least a rollover in May.

Sellers were hoping that April slack demand was a thing of the past, as buyers used up old stock, and that May volumes would rebound.

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

By Linda Naylor