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PP markets witness hike attempts for Jan in Europe

by Manolya Tufan - mtufan@chemorbis.com
  • 13/01/2020 (09:23)
In Europe, January PP offers emerged with rollovers to €20-30/ton increases last week, defying the stable propylene settlement. Margin recovery targets were cited as the main reason behind producers’ latest move. Moreover, sellers renewed confidence amid surging spot propylene prices.

Spot propylene jumps 16% in the past 4 weeks

In Europe, spot propylene prices responded to the crude oil surge in the past four weeks amid reports of more balanced supply-demand dynamics for propylene.

Spot prices on FD NWE basis have surged around 16% since early December, data from ChemOrbis Price Wizard show. This buoyed the sentiment among PP sellers, who already voiced their intentions to recover margins amid multi-year low prices .

Still, crude oil prices took their support from the markets later on amid easing fears regarding the US-Iran conflict.

Players are not fully back in harness

Players concurred that the market did not totally awaken from the extended year-end festivities. “It is hard to evaluate changes in supply-demand dynamics, if there is any, as buyers shop around for the best deals they can find,” a PP player said.

A market source reported, “We applied €20/ton hikes on PP. Nevertheless, it is still early to receive real feedback from the market. We do not exclude the possibility of concluding deals with rollovers as the market may not be strong enough to absorb hikes. Homo-PP supplies are ampler than other PP grades.”

Buyers aim to pay rollovers

It remains to be seen if it will be a month of stability as expectations for demand differ. Some players expect to see better buying activity as buyers closed the year with low stock levels.

Others, however, reported that demand remains as the main concern as buyers are not willing to pay increases owing to the stable outcome of the propylene contracts.

“It is because market players do not expect a flourishing end demand particularly in the automotive sector. Supplies are comfortable while demand is not brisk yet,” a player argued.

Chinese New Year signals slowdown

China’s import PP market has remained flat so far despite positivity around the “Phase 1” trade deal and the short-lived spike in crude oil futures. Pre-holiday lull as well as oversupply concerns outweighed other bullish factors in the market, according to players.

Some buyers in Europe foresee a stable trend amid projections for a slowdown in the PP markets stemming from China’s absence at the end of January for the Chinese New Year holiday.

Are increases delayed to February?

Although some PP producers have approached the market with hikes, most buyers believe that a stable trend might be likely for January amid limited demand and comfortable supply.

According to players’ comments, the February outlook seems to be more optimistic as rising spot propylene prices keep sentiment firm. This may push buyers to replenish their stocks ahead of possible increases.
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