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Contradictory factors in Europe lead to mixed expectations for PP

  • 20/05/2016 (03:54)
May PP deals are being concluded with rollovers or modest increases of up to €30/ton in Europe nowadays as sellers trimmed their initial hike requests given muted demand. Players already started to express their June expectations amidst a market scene that is caught between slow activity and firmer costs.

The majority of May transactions were reported at flat or €10-20/ton higher levels from April this week in Italy and West Europe. Expectations are now calling for a mostly stable trend next month while some players do not exclude the possibility of slight discounts pointing to demand conditions. On the other hand, spot naphtha and propylene prices in the region are firmer and the PP market may not ease depending on the outcome of new propylene contracts, according to others.

ICE Brent crude oil futures rose by around $1.33/barrel over the week, while indicating a $3/barrel gain from the beginning of May. Higher energy costs pushed spot naphtha prices above the $400/ton CIF NWE threshold this week. Accordingly, naphtha costs were up by around $30-35/ton week over week and when compared to early May. Spot propylene prices suggested a €30/ton increase on FD NWE basis so far this month.

“Our PP supplier trimmed hike targets from €40/ton to €15/ton. Demand has been weaker than expected in May,” an agent of a West European producer noted. A distributor in Germany agreed, “Buying interest was slow during this month while we expect to see mostly rollovers for June.”

A compounder in Germany purchased small quantities after paying small monthly increases. “Our end product demand has slowed down recently. PP prices may see some discounts during the summer months,” argued the buyer. Some sellers attributed slower activity to bank holidays in May, with a distributor complaining about selling only slightly more than half of his allocation.

In Italy, a distributor confirmed unsatisfactory demand, saying, “Prices are likely to follow a steady trend in June since the market is weak whereas crude oil prices are quite strong.” A converter highlighted, “Our West European source revised its initial increase from €40/ton to €20/ton later in the month. We preferred to purchase import Korean PP to be delivered in June with a small discount in addition to some quantity we purchased at the end of April. Our end business has somewhat lost steam.” Another buyer also skipped May purchases since import materials he purchased in the previous month are arriving, even though his regular European supplier revised down its hike target.

On the supply side, a couple of converters said that some sellers reported having limited availability for certain grades though no considerable supply issues are voiced for now. Meanwhile, France’s Total declared force majeure on multiple polymers, including PP, PE and PS from its facility in Gonfreville, France given strike related difficulties. The company produces 230,000 tons/year of PP in Gonfreville.
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