PP prices continue rising in Europe on restricted supplies due to production issues

11-May-10

Polypropylene (PP) buyers in Europe have been faced with additional price increases in May as production issues continue to affect availability, as per ICIS. The buyers have to cope with higher prices by atleast €30-40 vs April levels, amid huge shortages of PP. Net prices for homopolymer injection are at €1250/tone FD (free delivered) NWE minimum from western European selling sources. Buying sources had hoped that the tight situation would ease after paying increases of €300/ton between January and April 2010, but force majeure restrictions from Total called on 6 May has led to concern for deliveries from some buyers. The company has not disclosed the location of the affected plant but it was widely believed to be at Feluy, Belgium. Unconfirmed speculation over the cause of the problem suggested that it was a propylene pipe issue which led to the halt of production. Force majeure restrictions are still in place from INEOS’s 285,000 tpa PP plant at Grangemouth, UK, due to a technical issue. The plant is running normally since the end of March, but inventories are tight and force majeure remains in place. PP availability has been restricted for some weeks mainly due to propylene supply issues, and the prohibitively high cost of propylene which meant that competitive products like nitriles, where margins were better than in PP, consumed the spare propylene, leaving PP producers unable to pay the high cost of spot propylene. The spot propylene monomer situation has eased, but PP technical issues have exacerbated the already tight scenario. Many sellers expect the strong PP market to continue into June, despite earlier expectations of new capacities affecting global markets by then. In Asia, the drop in crude oil and naphtha prices in recent days affected sentiment in this market, and homopolymer injection prices had slipped by US$20/ton to US$1300-1380/ton CFR. If prices continue to rise in Europe and fall in Asia, there would be opportunities for exports from Asia. Trading sources hesitated to buy at present, as there was a widespread expectation of prices falling in H2-2010 amid an expected supply glut. Only limited quantities of imports have been offered into Europe, but all expect the situation to change in the coming months. For the time being, however, the PP market remained in the hands of the sellers.