Italy's PP market yields to larger price drops for September

Italy’s PP market yields to larger price drops for September

22-Sep-11

In a bid to hold the market steady, PP sellers initially asked for rollovers for September in Italy, as per ChemOrbis. This was despite the €37/ton drop in the monthly propylene contract. After the initial rollover requests were down-revised by up to €30/ton in spot PP deals, the size of the decreases has grown in H2-September, mainly on very poor demand in the country. There is very little hope of revival in Italy in the near term, now that Standard and Poor’s has cut its ratings by one notch, warning of a deteriorating growth outlook and damaging political uncertainty in the country. This news has added to mounting concerns in the region, where Greek default fears are lingering on a large scale. Only a limited number of spot PP deals have been reported this week in Italy. Some converters prefer to delay their purchases in anticipation of seeing lower prices as they are already seeing very low interest for their end product applications. Others who are running out of stocks are also limiting their purchases to their minimum requirements. Sellers widely complain about difficulty of making sales. Many have also raised concerns about seeing prices below a new lower threshold more this week, particularly for Central European and non-European origins, as they widen the gap between the low end and the high end of the overall market level, which is mostly formed by the official offers for some West European origins. Even a distributor offering locally held Korean PP block copolymer materials at the very low end of the market range commented that he is still facing difficulties in concluding deals. Their customers are telling them that even though they consider this price as good, they prefer to wait on the sidelines. Following the earlier decreases of €10-30/ton as well as a couple of rollovers reported in the done deals so far this month, a buyer reported having purchased homo PP injection this week from a West European producer €50/ton lower on cash basis when compared to last month. The same buyer also bought some South African homo PP injectionat competitive prices constituting the low end of the market range. Accordingly, these factors are believed to keep pressure on the country’s spot market, weighing down particularly on the high end of the overall market range for the near term now that the low end has fallen by a significant amount.