For the sixth month in a row, Italy’s PP market has posted price increases. As per Chemorbis, though the May propylene contract showed a small increase of €20/ton, much larger price hikes have materialized in the PP market. Since the first week of May, spot PP prices have been gradually rising about €60-80/ton above the average April prices by May 24, according to ChemOrbis Price Index.
Sellers active in the Italian market report that they have very low stocks. Few resellers have managed to sell out their quotas in the early days of the month, resulting in a supply crunch - the main reason behind the recent uptick in prices. Tight supply has overshadowed many bearish factors as the PP market shrugs off the sharp decreases in crude oil and naphtha markets since the beginning of May. The market has also been unresponsive to the growing concerns over the spreading debt crisis in Europe, the impacts of which have gripped other global markets. Needless to say, overall demand is not spectacular in the region; but the market retains its firmness.
Buyers continue to lament about the relentless price hikes despite no major improvement in their end product business. They have felt forced to accept the hike requests of their suppliers as they are worried about not securing their needs amidst the prevailing tightness. There are also buyers reporting delays in deliveries from their regular suppliers.
The outlook for next month indicates further firming ahead since there are renewed concerns about the state of PP supply supported by the force majeure declaration from Total and LyondellBasell’s Polish plant. The upstream spot propylene monomer market has also been pushed back up by the same type of concerns following the softening seen in the first half of the month.
Though some players are expressing concerns about overheated prices in Italy which may spiral downward in the medium term, the majority of players do not think that price declines can happen in the near term since the market is also protected against imports. In the early days of May, some buyers delayed their purchases to the second half of the month in hopes of finding competitive prices following the emergence of some irregular non-European origins offered on locally held or import basis. Although persistently rising prices had earlier opened the door to imports, the chances of finding competitive offers have faded in the past few weeks as the plunging euro pushed the dollar to some of its highest levels in years, rendering import offers unworkable in Italy. Accordingly, the continuous tightness in supply is not likely to be eased by imports, keeping the market outlook firm for the short term.