New PP hikes on horizon in Europe, increase amounts under discussion

In Europe, market players are readying to leave the market for Christmas holidays until January 2 after closing December deals up €20-30/ton. European PP sellers are now talking about large hike attempts for the post-holiday period due to the expectations of a higher outcome in propylene contracts as well as supply concerns stemming from some production outages and transportation disruptions.

January propylene contracts are likely to settle higher given shortening availability amid production hiccups at regional crackers including Czech Unipetrol’s Litvinov cracker, Shell’s Wesseling olefins unit in Germany as well as Dow’s Terneuzen cracker in the Netherlands.

While expectations are calling for increases ranging between €30/ton and €60/ton in propylene contracts, PP sellers have already started to voice their intentions to seek larger increases in an attempt to recoup their margins.

A seller admitted, “We expect €30-40/ton increases in January propylene contracts and if this materializes, we might ask for larger hikes for PP to recover our margins.”

A distributor in Italy, meanwhile, heard about increase attempts of up to €100/ton in January PP prices. “We have placed some orders for January; however, our suppliers avoid disclosing new offers. They are only talking about hike attempts. We also heard about the lack of trucks and some transportation issues in the region,” said a buyer in Switzerland.

Along with the cracker outages, downstream availability might also diminish due to the maintenance shutdowns, which will help give an upper hand to the sellers in quest of hikes.

LyondellBasell is planning to conduct a four-week-maintenance shutdown at its PP unit in England. The producer was also reported to have been facing some production hiccups at the Aubette plant, France although no further details were obtained at the time of publication.

A player noted, “We are building stocks ahead of the PP shutdown in the UK as this plant is a principal supplier for the German market. This is why we expect tighter PP supplies in January.”

Expectations of a better demand in January also support sellers’ upcoming hike requests. Some sellers claimed that demand was better considering the bullish talks while others reported seeing regular or less than normal demand given inventory management concerns. Buyers, who skipped buying this month, are expected to replenish stocks next month. A distributor said, “Buyers’ stocks are currently low, which might create some demand in January.”

A source from a West European producer also reported, “Large buyers did not engage in purchases in big volumes as our customers mostly buy material in bulk. They only purchased to achieve their year-end rebates this month.”