Higher propylene contracts pull Italian PP market up for March

02-Mar-11

As Europe’s initial March propylene contract price was settled early this week with an additional increase of €80/ton from the February contract level, Italy’s PP market has started to witness new hike requests for the third month in a row, as per Chemorbis. Due to persistent supply concerns stemming from unexpected propylene outages and the approaching maintenance season for propylene units in Europe, PP players were already seeing firm spot propylene prices as an indicator of higher March contract prices and firmer initial March PP offers in turn. Prior to the contract settlement, some traders in Italy had already reported that they were planning to seek increases of €30-70/ton on their March prices. “We are planning to ask for €50-70/ton increases in March even if the new propylene contracts settle with a smaller increase,” a trader had commented last week, justifying his higher sell idea by pointing to tight supplies across the region. Right after the propylene contracts, hike requests of €80/ton have started to come officially from the regional producers. A couple of PP producers from West and Central Europe have already reflected the full propylene increase on their initial March prices so as not to hurt their margins. Based on this month’s higher propylene contract prices, the theoretical cost of producing and delivering PP is now pulling the low end of the spot PP market towards a new threshold. Looking back, despite restricted purchasing activities over the month of February, European producers were able to pass increases of €30-50/ton on transactions due to tight regional supplies and a €35/ton increase on February propylene contracts. As buyers are hesitant to build stocks at current levels, demand still does not show a spectacular performance in Italy for now but sellers hope to achieve better sales in later weeks pointing to the upcoming high season.