Rising propylene encourages European PP sellers to mull hikes in Italy

After the April propylene contract in Europe settled with an additional increase from the previous contract settlement, PP sellers have started to talk of price hikes of up to €110/ton for April, as per Chemorbis. Monomer contracts were €70/ton ($95/ton with the recent parity) for April, overshadowing the March increase of €35/ton in the region. The surge in April contracts can be attributed to surging spot propylene prices as well as low supplies in the region as a result of several production issues. Spot propylene prices have risen €70/ton since the beginning of March, in line with the contract movement. Combined with the upward momentum in naphtha and crude oil markets, which managed to remain above US$80/barrel in most of March, the rising feedstock prices provided a firm ground for European PP sellers, thereby causing a firm April outlook despite the lackluster demand and delayed season in most PP end-use applications. Italy’s spot PP market remains bullish, in line with firm feedstock and energy prices as well as the warming weather, which encourages players to expect better demand next month. Italian PP sellers have been complaining about persistently low demand for the last few months due to buyers’ stocks and slow performance of end-product markets. However, finding support from firm upstream costs, they successfully passed increases of €40-50/ton over February on their deals this month. Meanwhile, initial homo-PP offers and sell ideas for April are racing towards new levels, with sellers coming with further increases of €70-110/ton this week. Taking the recent spot propylene values into account, a theoretical cost of producing PP corresponds to €1160-1170/ton FD North Italy, 60/90 days deferred payment after adding an estimated conversion cost of €150/ton disregarding inland freight rates and margins. Looking at the current levels in Italy’s homo-PP market, the theoretical levels exert upward pressure on the low end, although most buyers voice their discontentment about sellers’ higher prices, with many hesitating whether they will be able to reflect the full hikes to their end product prices. “The end product demand for compounds has improved a little but we are still facing problems to convince our customers to accept the increases,” a buyer commented.
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