PP buyers in Europe restrict buying, consume stocks

21-Oct-09
In anticipation of a further price dip in November, European buyers of polypropylene (PP) are buying very limited quantities. In fact, despite falling prices, buyers prefer to dig into their stocks and are not buying at current prices. As per ICIS, producers are trying their best to limit price erosion to similar levels of €28/ton drop in the October propylene contract price, which settled at €750/ton FD (free delivered) NWE (northwest Europe). But buyers are concluding deals at a €40-50/ton drop from September, leaving net homopolymer PP prices in the mid 900s/ton FD NWE. PP producers continue to report a balanced stock position, but acknowledged that there was growing pressure for lower prices. Hopes for lower propylene prices next month were being tempered by the recent spike in crude oil and naphtha prices. Brent crude oil prices are trading above US$75/bbl and naphtha at US$600s/ton CIF (cost insurance freight) NWE for mid-October, but the weak US dollar mitigated the effect of this to a certain extent for European buyers. In the absence of cheap propylene feedstock (at €750/ton), European PP producers have been unable to export material to China where PP prices are pegged at US$1080-1100/ton CFR. Another major consideration for European PP players is the anticipated supply glut from the new PP capacity coming on stream in the Middle East
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