Polypropylene (PP) prices in Europe have increased this month, but buying has been limited to essential purchases, as there are still widespread expectations of a price drop in 2010, as per ICIS. Buyers are very cautious and buying on a hand-to-mouth basis. PP prices had risen by a minimum of US$116/ton at most accounts in February, as producers pushed the propylene monomer increase on to buyers. Propylene for February stood at €875/tonne FD NWE, up €85/tonne from the January contract. Net homopolymer PP injection prices were now around €1,020/ton FD (free delivered) NWE. Reduced output had pushed up PP prices; however, this had been mainly because of the lack of available propylene monomer, rather than strong demand. Production issues also affected supply in February.
SABIC declared force majeure on copolymer deliveries from one of its two plants at Geleen, the Netherlands, on 8 February, due to technical issues that affected production, with deliveries expected to be back to normal during the course of March. INEOS continued to report tight stocks due to the polyethylene (PE) issue at Grangemouth, UK, where reduction of the cracker rate led to propylene availability issues for PP. The latest news suggested that PE production would be back to normal by the end of February. INEOS had already increased its offer prices of February PP to plus €100/tonne for new business.
Despite strong upward pressure from producers, some smaller and medium-sized buyers said they intend to limit buying as much as possible in February, in order to avoid increases. Larger buyers, who were more dependent on the continuity of supply, generally acknowledged that they had to pay the increases demanded if they wanted to get their material. The market was still waiting for new Middle Eastern and Asian capacities to have an effect on prices, but projects were delayed, and the recent strong demand from China soaked up any increased material. However, activity had slowed significantly in the past few days, as China came to a halt for Lunar New Year celebrations, and a lot will depend on how strong China is after the holidays.
A rollover to slight increase was expected for propylene monomer in March, but PP producers were already mulling over increases for March PP due to the supply/demand balance, which they saw as in their favour.