LONDON (ICIS)--Polypropylene (PP) buyers in Europe are looking forward to enjoying lower prices in July following last week’s settlement of the July propylene contract at a reduction of €50/tonne, sources said on Monday.
Some PP buyers have already received assurances from their suppliers that they will get the €50/tonne propylene drop in July, while others said some producers were trying to hold on to some of the monomer drop, as the market is widely regarded to be pretty solid.
Some PP grades remain tight, with only a few commodity homopolymer grades falling sharply in the spot market, as imports affect sentiment and pricing.
“It’s a bit of a strange situation,” said a producer. “The industry has talked itself into a weakness that isn’t really there.”
Nevertheless, prices fell in June and they are already falling for July, it’s just a question of by how much, said sources.
Imported homopolymer volumes for September arrival are expected to be in the region of €1,100/tonne, up from an earlier level of €1,050/tonne FD (free delivered) NWE (northwest Europe).
Sources said more material was available from South Korea, as China took less volume. Local suppliers in Europe had competed with a limited number of grades at lower levels, said buyers, but it was clear that by no means all PP homopolymer grades were available at knock-down prices.
“We are struggling to get the monomer [reduction],” said one PP buyer at the end of June. “The grades we buy are still tight.”
One of the reasons for the fall in propylene and, subsequently, PP pricing was the drop in naphtha prices compared, but by Monday, crude and naphtha had rallied somewhat, with Brent crude trading back up towards $49/bbl, having dropped to the mid-$40s/bbl in June.
On Monday, naphtha was assessed up at $408-409/tonne CIF (cost insurance freight) NWE. It had been trading below $400/tonne in recent days.
Sellers were hopeful that the bottom of the current cycle would be reached by August. Demand was good, arbitrage opportunities were fewer as European prices fell, and the new swathe of capacity coming on stream in the US was mainly for polyethylene (PE), and not PP.
Some PP investment was due to bring on new capacity in India this year, and China was also bringing on PP supply, but investment in Europe is limited to several propane dehydrogenation units in Europe in several years’ time.
PP is used in packaging, the manufacture of household goods, and also in the automotive industry.
Focus article by Linda Naylor
Image source - SIBUR