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European PP buyers and sellers set for a tug of war for November

by Manolya Tufan -
  • 25/10/2021 (13:09)
In Europe, October has been a month of stability in most cases as balanced supply/demand and rising costs counterbalanced each other. Players are now trying to gauge the outlook for November amid a bundle of opposing factors.

Higher upstream costs and dwindling import volumes support sellers in their quest of hikes for November. Buyers point to the mediocre demand as a factor that may alleviate cost pressure, not to mention a lack of major supply concerns across the region.

Suppliers aim to reflect higher costs

With firm monomer expectations amid multi-year high naphtha prices and rising utility costs, producers intend to apply November hikes. November propylene contracts are expected to settle with hikes of around €50/ton on the back of spot gains and higher costs.

Spot naphtha prices on CIF NWE basis posted a cumulative gain of $90/ton in the past month and hit a 7-year high during the week ending October 22, according to ChemOrbis Price Wizard.

Apart from this, some regional producers voiced their intention to implement an energy surcharge totalling €50/ton for the time being. LyondellBasell decided to implement a natural gas and electricity surcharge on all its PP orders supplied after November 1, 2021.

Players see a strong rebound unlikely

There seems little possibility to see large hikes passing on November deals, considering that PP markets still stand at an all-time high.

FD – Italy – PPH – PPBC

Prices particularly in West Europe are inflated and are believed to have no room for additional hikes. A source from a producer reported, “We could not obtain monomer hikes in October, which forced us to step back to rollovers. Our prices are on the upper end of the overall ranges, which may be the reason. Activities are calm in many European countries.”

A distributor also said, “Our West European supplier aims for larger hikes for November due to rising utility costs. Yet, we may skip purchases in case of sharp hikes as prices are already high.”

Plus, there is a lack of confidence in demand outlook as activities may slow down further due to shutdowns in the automotive industry amid chip shortage and approaching Christmas holidays. Although some converters were evaluating whether to buy some material for November amid firmer voices, buyers generally seemed less interested in stock replenishment. They have been complaining about being unable to reflect such high costs onto their end product prices.

On the supply front, regional stock levels have improved amid returning capacities after lifting of force majeures and completion of turnarounds.

According to players, these factors are likely to put a cap on increases particularly on the high end of the ranges.

Imports may sustain firming

However, import prices are expected to add to their gains so long as shipping turmoil persists and sky-high freight rates see a tangible correction. Plus, imports may have room for further hikes, looking at the still-wide gap between European and non-European origins even after the latter saw large hikes recently.

A trader sold locally-held South Korean PPBC inj. at €1900/ton FD, up by €100/ton. Meanwhile, the seller reported to have received fresh import offers with €200/ton hikes from his South Korean supplier.

In the import market, Indian PPH inj. deals stood at €1620/ton CIF, 60 days, with delivery in January. Fresh offers for this origin reached €1700/ton with the same terms, meanwhile. South Korean PPBC inj. was offered at €1810/ton CIF, with shipment in late November-early December.

Tug of war over November PP pricing awaited

November expectations mostly call for a stable to slightly firmer trend. Buyers and sellers will be playing a tug of war as both sides are well supported by their arguments. A player argued, “Whoever holds and pulls stronger will win and set the market trend.”
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