Is 6-month downturn over in European PP markets?
Spot PP prices have fallen by 15% from mid-May to early December, according to ChemOrbis Price Index. After six months of gradual decreases, PP prices are now facing rollovers and small hike attempts.
Higher C3 contracts likely to halt PP downtrend in Europe
Before prices witnessed moderate gains with support from propylene contracts, PPH inj. and PPBC inj. prices hit their lowest levels since 2016 in November.
According to the weekly average data from ChemOrbis Price Index, PP prices in Italy hit their lowest levels since March 2016, while in Northwest Europe, prices retreated to their lowest levels since July-December 2016.
The overall market conditions may not help prices shift direction, although some producers seem determined to bring an end to the six-month downturn and preserve margins.
But PP buyers unwilling to pay increases
The higher monomer settlement came as a surprise to many players. However, some players interpreted this move as symbolic in order to hold further decreases in check.
A buyer commented, “The €5/ton higher monomer can prevent prices from posting further declines and pave the way for rollovers amid short month and year-end sluggishness.”
“PP prices are likely to shrug off higher propylene as the market lacks support from supply-demand dynamics,” opined a trader. Sellers in the distribution channel already applied rollovers due to the weak stance of demand and ample availability. Still, the PP market is deemed more balanced than the PE market amid the lack of aggressive import offers.
A similar picture was drawn back in October, when sellers had to step back from their initial hike targets, driven by the €10/ton higher propylene contracts, and had to concede to rollovers.
Is 2020 set to start firm in European PP markets?
Expectations for 2020 are yet to gain clarity while some players expect a stable to softer trend to persist in the first quarter. This is mainly due to the prospects that a sudden recovery may not be seen early next year amid economic challenges.
On the other side of the coin, crude and naphtha prices have been posting some gains recently. The recent surge in crude oil futures had already brought about bullish expectations as OPEC and allies may deepen production cuts in the first quarter of 2020 to rebalance oil markets.
Moreover, nationwide strikes have begun in France on December 5, raising concerns about delivery and transport disruptions on part of chemical companies for the coming days. Seven of the eight refineries in France are currently on strike; although players have not reported any supply disruptions yet.
A distributor opined, “Buyers are purchasing this month as they expect a rebound in January. We expect to see increases of €10-20/ton next month due to better demand and higher naphtha costs.”
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