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October hikes prove short-lived in Europe’s PP market

by Manolya Tufan -
  • 14/10/2019 (09:06)
In Europe, initial PP offers emerged with slight increases in line with the €10/ton higher propylene settlement. Yet, players reported that rollovers started to pass on deals particularly in Italy while some hikes were sporadically achieved in Northwest Europe.

Weak conditions take the edge off firmer propylene

The ongoing sluggishness in downstream buying interest, which is widely linked to the weakening automotive sector, and ample supplies thwarted some sellers’ October price increase targets.

Hand-to-mouth purchases defied higher propylene settlement and led to stability of PP prices in most cases. Needless to say, some PP deals in the contract market were concluded with slight increases of €10/ton. A distributor said, “We could sell a part of our October allocations at slightly higher prices due to some supply limitations at our supplier’s plant.”

PP prices may remain flat at 2-year lows

September deals were closed with €50/ton decreases while higher October offers failed to be widely absorbed. After the recent rebound happened to be short-lived, spot homo PP prices in Italy and Northwest Europe stand at their lowest levels since July-August 2017 on a weekly average, as per data from ChemOrbis Price Index.

Although some converters expect to see small reductions later in the month, players think that prices might remain flat in H2 October. Prices are believed to have no room to drop further owing to producers’ squeezed margins and the fact that PP is more balanced than PE. A player argued, “The market would find its balance amid weak supply-demand dynamics and higher propylene settlement.”

Year-end lull, lower upstream weigh on Nov outlook

Players are to gather at the K Fair to be held on October 16-23 in Düsseldorf, Germany. This is expected to hinder smooth trading activities in the region. Moreover, sellers’ destocking activities towards the year-end also pave the way for weaker expectations on the buyers’ side.

Moreover, operations have been resumed at some European crackers recently. The return of crackers from maintenance shutdowns as well as imminent restarts raised concerns that growing supplies will pull propylene prices down in the days to come especially when ebbing demand is taken into account. Therefore, players don’t exclude the possibility of seeing lower prices for November owing to lower upstream markets.

On a side note, the most recent upsurge in crude oil futures upon the news that an Iranian oil tanker was hit by two missiles near Jeddah is to become an increasingly important one for European players to keep in mind in the days ahead. Crude futures rose by around 2% in the heat of the moment.
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