PP buyers in Europe monitor upstream prices to assess direction for October prices

25-Sep-14

Polypropylene (PP) buyers are monitoring pricing movements upstream to see where October prices might land, as per ICIS. The downward price movement of September propylene contract triggered a downward price movement in PP. Buyers expect this trend to continue in October, so they are watching naphtha, one of the principal drivers of propylene prices, closely. On Wednesday morning naphtha was assessed at US$829/ton CIF (cost insurance freight) NWE (northwest Europe), down from a level as high as US$874/ton at the monitor of August. Such a drop in upstream naphtha prices would usually lead to expectations of a price drop in the propylene monomer contract, but the dollar has weakened against the euro, leaving euro-based naphtha prices high. “It’s a difficult month [October] to predict,” said one large buyer that had been following naphtha movements closely. Supply and demand clearly also play a large role in PP pricing, and while there was no evidence of supply shortages, there was no great length in the market either. “We were given [price] advantage on certain grades, but this is no longer available,” said a reseller. Most buyers found a €50/tonne price drop easy to achieve in September, in line with the drop in the September propylene contract, but they also said further price drops were not possible. “There are no shortages from any supplier,” said another large PP buyer to ICIS, confirming some shuffling around with volumes. However, some concern abounds over the level of demand coming up in the fourth quarter, as customers are uncertain of the volumes they need. “Demand was bad in early September,” said another buyer in the packaging sector. “It’s better now, but it’s still not great.”