Optimistic outlook for March by PP sellers in Italy

24-Feb-10

Europe’s propylene market that has been plagued with ongoing plant outages will see added supply constraints due to the upcoming turnaround season at steam crackers, new production problems at crackers, and rumors that Total has declared a force majeure on the propylene supplies from six refineries in France due to a workers strike. As per Chemorbis, an increasing number of buyers intensified their inquiries to secure some material as the odds of further strikes and supply shortages looms in the region. PP sellers have started to voice their expectations of a firm outlook for the awaited March propylene contracts amid crude futures that have rebounded to US$80/barrel and gains in spot propylene prices. European PP sellers expect to see additional increases above February propylene contracts that were settled with a monthly increase of €85/ton. An increase of €30-40/ton has been heard in offers to the Italian market for March shipment homo-PP, although there are no official announcements so far. Sellers had managed to pass increases of €70-100/ton over January on February spot deals despite unsupportive demand from Italian buyers and complaints about poor end-business. Although theoretical PP production costs are nearing the €1100/ton based on spot propylene, converters doubt whether the market will be able to handle offers above this level, pointing to slow performance of their end product business as the high season is yet to start for many PP applications.