High propylene spot prices are unsettling the downstream polypropylene (PP) market in Europe this month as the possibility of an increase in the February monomer contract looms, as per sources in ICIS. A PP producer plans to ask for higher prices for extra volumes to take advantage of the definite signs of pre-buying this week.
PP buyers are cautious but are aware of the current strength in the monomer sector. Most players in the PP sector understand that recent increases have been based entirely on upstream costs and production cutbacks rather than any fundamental strength in the market, but they are also aware that if propylene rises in February, producers will be targeting an increase in their market. Plant cutbacks limiting propylene output, coupled with the recent unplanned outage of the Naphtachimie cracker in Lavera, France, has led to a spurt of propylene buying. Despite concerns over an increase in the February propylene contract price, any upward movement is not expected to be major by most PP players- a rollover and plus €20-30/ton (US$27-40/ton) is expected on the February propylene contract price. The spot PP market is not witnessing the expected upturn in demand, and some traders have even dropped prices a little to entice buyers back to the market. Homopolymer injection net numbers are around €1230-1250/ton FD (free delivered) NWE (northwest Europe), down by around €20/ton from earlier in the month.
January PP prices have increased for contracted business, with an increase of €20-30/ton fully confirmed, in spite of the €13/ton drop in the January propylene contract price of €1090/ton FD NWE. Spot propylene price ideas from sellers are now above the contract level, but buyers are loath to accept them.