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European PP market sees step backs from initial July offers

by Manolya Tufan - mtufan@chemorbis.com
  • 20/07/2020 (03:54)
European PP sellers have mostly stepped back from their initial hike requests matching the propylene upsurge. Scant demand was blamed as the main driver behind the downward revisions as buyers resisted paying the entire monomer hike. July PP deals reflect €40-70/ton increases depending on the grade and starting level.

Demand remains patchy, pre-buying curbs appetite

Market sentiment is somewhat mixed amid divergent demand views. Packaging demand has been performing well since the start of the pandemic, while market sources have noticed a slowdown from its peak during the lockdown period. A buyer reported that he could buy with smaller increases due to the recent slowdown in demand in the packaging sector.

Conversely, demand in the automotive sector has remained unsatisfactory even after plants resumed activities in line with the easing measures.

A compounder reported, “There is no visible recovery in the automotive industry. Therefore, we have not ramp up production to full rates. We can operate at 75% capacity thanks to relatively better packaging demand.”

Players also reported that buyers’ earlier pre-buying activities made it difficult to pass-through the rise in feedstock costs.

Construction works support furniture applications

Nevertheless, a manufacturer noticed a slight improvement in the building sector in line with the reopening of construction sites and shops around Europe. According to data obtained from Eurostat, seasonally adjusted production in the euro area’s construction sector increased by 27.9% in May.

This had an indirect impact on the furniture applications, players argued.

A converter manufacturing gardening items enjoyed healthy end demand due to seasonal reasons. He said, “We paid €65/ton hikes for PP as we received a good number of orders. We are evaluating whether to do some pre-buying or not.”

Early expectations emerge for August

The majority of players expect a mostly stable trend in August considering that summer holidays will curb buying appetite as converters shut their lines for 2-3 weeks. Holidays have started in the northern part of Germany, a trader said. Yet, PP suppliers aim to avoid any drops, pointing to still low prices.

Although it is too early to make a prediction, some players expect to see slight increases of €30/ton in the next propylene contracts.

According to ChemOrbis Price Wizard, spot propylene prices on FD NWE basis have reached their highest levels since around mid-March.

Energy markets will also be closely tracked. The focus will be on crude oil movements after OPEC+ decided to trim oil cuts as of August. Meanwhile, the recent spike in COVID-19 cases may cast a shadow on the normalization process.

“Since market conditions might not support any hikes in the short term, we expect a mainly stable trend in August. Buyers are buying on a needs only basis,” a trader opined.
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