In Italy, European PP sellers managed increases of €100-130/ton in January business particularly in H2-Jan, supported by strong energy costs, as well as a €110/ton increase on January propylene contracts, as per Chemorbis. New February offers are emerging with further hikes in line with widespread expectations while the high end of the spot PP market is climbing above a new threshold. As February propylene contracts were settled with an additional increase of €35/ton from January contract settlement, European PP sellers, who had already been warning their customers about further firming in February, also started to further hike prices by €35-60/ton. Amidst this higher cost environment, more offers are expected to emerge with similar sized hikes in the spot market for the near term.
Looking at the costs side, a theoretical cost of PP, which was calculated by adding an estimated €150/ton conversion cost and inland freight costs on top of the current contract prices for propylene but excluding sellers’ margins, is currently supporting homo PP sellers offering at the lower end of the spot market. In a rough comparison, however, the new high end of the spot market is standing at least €200/ton above the theoretical PP costs, which may force PP sellers who are offering at the higher end of the price range to concede to smaller increases this month especially if the market sees lower priced non-European cargoes in the later weeks of the month. Indeed, the higher exchange rate, rising local prices and Italy’s ongoing premium over other global markets may lead to more non-European sellers coming to Italy especially in the absence of Chinese buyers during the New Year holidays. A distributor was informed at the end of last week that large volumes of South African material will enter the Italian market this month.