Italian PP players wait for further price cuts in July

27-Jun-12

Just as suppliers to China are attempting to put the brakes on falling PP prices, Italian players report they still expect to see important price reductions in July, as per ChemOrbis. PP buyers in Italy said they were holding off purchasing as much as possible during this week because they are confident of seeing lower prices next month. A major factor behind this expectation is the upcoming settlement of the July propylene contracts. With spot propylene prices being lower this month compared to May, players have been anticipating a price reduction in the contracts. Shortly after the June propylene contracts settled at the end of May, spot propylene prices tumbled by €100/ton. Since that tumble, prices have softened slightly by a further €15/ton compared to early June. A source at a South European producer said to ChemOrbis this week, “We expect propylene contracts to fall by €50-70/ton for July.” A source at a West European producer had larger expectations saying, “We expect propylene to fall by up to €100/ton for next month.” Overall the PP market in Italy has been pressured by lackluster economic developments in the region. Plus, poor global economic news has kept a steady stream of import sources available. Currently it is Saudi Arabian origins which are making up the low end of the local price ranges, though some traders have come within a €20/ton range of the low end with European materials hoping to sell some stocks before July. However, there is a gap of €120/ton between the high end of the local PP ranges and the low end which will have to narrow with lower July propylene contracts. At the same time there is a gap of €40-60/ton when comparing lower European prices in Turkey to the very low end of European prices in Italy as producers look for export markets to take their excess supplies.