November expectations for PP appear bearish in Europe

The European PP market has been holding steady so far this month amid shaping expectations for November, as per ChemOrbis. Some players expect to see visible reductions considering the bearish upstream markets and discouraging demand while others think that tight supply for PP may contain the extent of the anticipated downfall. Even though spot propylene prices climbed by €20/ton on the week due to dwindling availability following Shell’s force majeure, weak naphtha and crude oil prices are continuing to dominate expectations for the upcoming month. Brent crude futures for December gained 34 cents to settle at US$86.16/barrel on the ICE Futures Europe exchange on October 17 after dipping to a four year low during intraday trading. Crude prices declined by 4.5% during last week. Despite inching up at the end of last week, spot naphtha prices on a CIF NWE basis remain below US$700/ton and they are suggesting a sharp fall of almost US$120/ton compared to early October levels. In the PP market, a distributor concluded some deals with rollovers from September in Italy. “We could only procure limited volumes of PP from our West European supplier this month, but demand is quite slow. Regarding November, we have heard talks about possible reductions from €50/ton to €100/ton due to weak crude oil and naphtha costs as well as thin buying interest,” the seller commented. A compounder settled his October gentlemen’s agreements for PP with rollovers, commenting, “We heard about expectations of strong decreases between €50/ton and €120/ton for the awaited propylene contracts. Meanwhile, supply of PP is short in the spot market.” Although the majority of the players are projecting decreases for November, some of them think that tight supply may put a cap on bearish expectations. A distributor in Belgium reported keeping his PP prices unchanged from September and added that demand has slowed down compared to the first half of the month. The seller does not expect to see large discounts on November PP prices as he thinks that supply and demand are in balance despite weak crude oil and naphtha costs. A German distributor also made similar comments, reporting, “Supply is short in the PP market while demand is stagnant. Lower crude oil and naphtha costs led to expectations of a downward trend. However, we think that tight supply may lend support to the market to some extent.” According to ChemOrbis, a converter reported buying some volumes with rollovers from different European suppliers. “We heard about possible sharp falls for PP at the Fakuma fair last week. We also think that there is room for discounts of €50/ton given slow demand and the weakness in the energy markets. However, supply is short so we think that PP prices are unlikely to post decreases larger than €50/ton,” the buyer said.