Italy’s PP prices hit 8 month high, propylene sees 2 year peak

12-May-14

PP prices have been offered with increases of up to €40/ton in Italy for a second month in a row following the settlement of European May propylene contracts with a €10/ton hike, as per ChemOrbis. Following the new announcements from European producers, spot PP prices have hit an 8-month high in Italy, supported by the increasing supply concerns. “Our supply is tight this month due to the maintenance shutdown at one of our West European suppliers. Therefore, we are offering €40/ton higher in line with our supplier, even though we believe that it may be hard to obtain the full increase,” said a distributor in Italy. Italian players report tight availability particularly for Central European origins. A distributor expressed his sell ideas €20-30/ton above April for Central European cargoes, commenting that his stocks are limited due to technical issues at his supplier’s plant last month. Some buyers who are concerned about not being able to find material are considering buying new cargoes soon. However, others delay their purchases to the second half of the month, anticipating that sellers will have to trim their hike targets down and supply concerns may lose pace. Indeed, initial hikes for April had also emerged in similar amounts as can be seen from the graph above. Nevertheless, they were later revised down with sellers having to concede to smaller hikes than they had aimed for. After supply concerns increased in H2-April, spot PP prices moved higher, even climbing above initial April levels, but prices are yet to move above the 2013 high. Some Italian buyers opine that a scenario similar to April will be in place this month, although supply problems may give a stronger hand to sellers this month. Players in Turkey, Algeria and Libya, regular export destinations for European PP, also reported that they have not received any regional offers yet, confirming the limited availability across the continent. “European offers may not be workable this month due to the high parity and limited supply,” said a large Turkish PP raffia buyer. According to ChemOrbis, not only PP but also propylene supplies are said to be tight in Europe. Spot propylene prices have been steadily moving higher for quite a long time, as can be seen from the graph below. Current spot propylene prices are indeed almost at a 2-year high in Europe, providing extra support to the firm stance of PP sellers across Europe.