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Early July expectations emerge softer in Europe’s PP market

by Manolya Tufan -
  • 17/06/2019 (03:11)
In Europe, June PP offers were initially rolled over in line with the outcome of monthly propylene contracts after consecutively rising in the past three months. However, some spot PP deals have recently started to be concluded slightly below May owing to weak buying appetite. Voices for a similar trend in July have surfaced amidst the seasonal slowdown and lower costs.

PP fares better than PE

Needless to say, PP deals in the contract market are awaited to be closed at a rollover from May.

However, some sellers have decided to offer discounts of only €10/ton to speed up their sales whereas PE decreases reached €30-40/ton in the spot market. This is because PP supplies are relatively more balanced with demand while the PE market is now well-supplied in the wake of fading demand and returning capacities as well as awaited imports.

Buyers in no rush to purchase on weak end markets

Although PP demand is stronger than it is for PE, economic concerns have a knock-on effect on end businesses. Buyers are in no rush to purchase as they are sure that they will be able to obtain small discounts as the month wears on. They are either limiting their purchases to the bare minimum or postponing them to the latter part of the month.

Lower costs, approaching summer weaken July expectations

Early July expectations mostly concentrate on a softer outlook mainly due to lower energy markets. Buyers point to the lower naphtha costs to justify their expectations.

According to ChemOrbis Price Wizard, spot naphtha prices on CIF NWE basis plunged by more than 21% on a weekly average since late April, when they hit around 6-month high. This is widely expected to find reflection on the next monomer settlements despite regional cracker turnarounds.

Spot propylene prices have already responded to the upstream losses and have turned down from nearly 7-month high as of last week, according to ChemOrbis data. Buyers commented, “Lower energy markets might pull prices down in July and we are not willing to buy when prices are on a downtrend.”

Apart from that, demand is not likely to rebound over the near to medium term ahead of the summer season. Unpromising demand particularly from the automotive sector, which has been the case so far this year, also dampens recovery projections.
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