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Firming trend set to lose steam in Europe’s PP market

  • 29/03/2017 (04:14)
The sentiment in Europe’s PP market was bullish up until this week with support from propylene, for which there were expectations of seeing large hikes in April monomer contracts. However, upon the recent slump in spot propylene prices, April propylene contracts settled with smaller-than-expected increases yesterday. This has also caused the expectations for a firming trend in the PP market to lose steam.

Expectations last week were calling for €50-70/ton increases in April propylene contracts while they settled only €15/ton higher late yesterday. Prior to the settlement, three West European producers also voiced their intentions of seeking modest hikes for PP next month.

“We expect to see some hikes but in small amounts in April,” said a PP buyer in Italy. A distributor in Germany, meanwhile, said, “Buyers did not pre-buy in March as they expected the market to weaken soon.” Confirming the changing expectations on the buyers’ side, a global trader in France noted that buyers decided to limit their purchases in March.This month, producers already managed to apply increases that were more than double the increase in the monthly propylene contracts in an attempt to improve margins.

PP prices have been on a steady upward trend since early this year in line with the higher monomer contract settlements. When April PP offers emerge higher, this will be the fourth consecutive month of increases. The current spot market already indicates the highest levels seen since August 2015 both in Italy and Northwest Europe on average, according to ChemOrbis Price Index.

In terms of supply, homo PP is widely considered to be sufficient although copolymer remains limited across Europe. Many buyers did not report a major difficulty in securing their needs this month. Considering that supplies are mostly balanced with demand, some players argue that the PP market may see some corrections, particularly in the latter part of the month if the upstream market takes its support away from PP prices.

In the meantime, the constant gains of the European PP market have also attracted imports to the region as the trend turned down in Asia and Turkey over the past few weeks. Further increases in the European PP market may stir more imports, rendering their prices more competitive and exerting extra pressure on the local market.

Players generally concur that the sentiment in the regional PP markets is still relatively stronger than that of the PE market, where a West European producer already revised its March LDPE offers down, HDPE supplies remain comfortable and buyers’ expectations for a reversal in April are more widespread. Affirming these expectations, April ethylene contracts settled at a rollover yesterday.
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