European PP players discuss November outlook

PP prices have extended drops into the second half of the month, with decreases beyond the October propylene contract cut passing on deals. The ongoing stagnancy of derivative markets as well as comfortable supply pulled PP prices to their multi-month lows. Players have shifted their focus on the November outlook amid stable to softer expectations.

Market participants are now wondering whether producers will be able to halt the current downward trend next month given the unpromising demand outlook on one side and possibly stable to firmer monomer settlements on the other side.

Slack demand sends PPH prices to multi-month lows

PPH prices have faced the strongest pressure during the month given aggressive non-European origins as well as flimsy demand. South African, Central Eastern and Saudi origins were among the most competitive sources, with PPH prices breaking below the €1200/ton FD threshold in Italy. Offers as low as €1100/ton FD were also heard in the market, meanwhile. Sellers were under sales pressure due to high inventories after scarce trading activities in September. Accordingly, some producers conceded to special prices to deplete their stocks.

Following October reductions, PPH prices hit their lowest levels since January in Italy and June in Northwest Europe this year, according to ChemOrbis Price Index data. In the import market, meanwhile, buyers received South Korean PPH offers as low as €1050/ton, on CIF basis, with delivery in January. Yet, they prefer to wait and see if further drops will emerge in the following days.

Buying interest likely to remain subdued

Suppliers lamented scarce buying interest amidst buyers’ high stocks and slack derivative markets. In addition, the demand outlook is not expected to see a real improvement in the upcoming months as players tend to get rid of their stocks amid the year-end closures. Plus, economic conditions are not likely to support the market considering muted demand in the automotive sector, especially in Germany.

A distributor of a West European producer commented, “November PP prices might see further reductions as demand is too weak to support a firmer trend. We had to revise our initial offers and give larger drops of €50/ton to spur demand as buyers refrain from purchasing fresh volumes owing to their high stocks and weak end-product businesses.”

November outlook under discussion

Market participants started to discuss the November PP outlook amidst firmer costs on one side and weak demand on the other side. Although naphtha prices show some increases on the month, many players exclude a possible upturn in PP prices for November. This is due to the fact that overall demand is not likely to improve in the near term while supply might remain comfortable.

However, producers started to share their rollover targets for next month, pointing to their currently narrow margins. Some of them expect the next monomer contract to settle stable to slightly firmer and for this reason they exclude further decreases to pass on PP deals. However, players are closely monitoring the geopolitical situation as a possible escalation in the Middle Eastern conflict casts a shadow on the near-term outlook.