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Will lower propylene cast shadow on European PP sellers’ hike intentions ?

  • 01/11/2018 (09:46)
In Europe, PP sellers already shared their intention to stand firm on their new PP offers for November regardless of lower upstream costs. Since propylene contracts have recently settled lower for November, players are now discussing whether or not the PP market will defy the propylene’s outcome.

PP transactions were closed with rollovers to slight increases for the past two months. This was mainly attributed to the fact that PP has been outperforming the PE market thanks to more balanced supply-demand dynamics.

Regarding the intentions to approach the market with rollovers to some hikes for a third month, sellers think that they will not be affected by the lower outcome of the propylene contracts.

A distributor in Germany commented, “Although upstream costs have turned down recently, we think that producers will approach the market with slightly higher prices for November as they were unable able to reflect the full monomer increases onto their PP deals in the last few months.”

“We closed our October deals with €10/ton increases despite €20/ton hikes in October propylene contracts. Demand was weak in October while sales were down by 30% compared to the same period of last year,” remarked a reseller from Italy.

On the buyers’ side, converters expect to receive mostly unchanged or slightly lower offers due to spot propylene and naphtha drops as well as the lack of major supply issues.

Although players point to the Total’s recent force majeure declaration on its PP supplies from Feluy, Belgium, no major complaints about supply limitations have been reported so far. Meanwhile, LyondellBasell is expected to restart its PP plant following a planned turnaround.

It remains to be seen whether lengthening spot supplies for propylene will hinder a possibly higher trend in the PP market or not. The impact of the logistics issues stemming from the low water levels on the River Rhine will be closely watched as some PP producers might have problems in procuring feedstock.
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