PP sellers' firm stance for September may falter in Italy

24-Aug-11

Markets in Italy are expected to resume at full capacity by next week, as Italian players start returning to their desks from long summer vacations, as per ChemOrbis. A few sellers who are in the market are offering steady prices compared to the pre-holiday period while suppliers prefer to wait to see the response of buyers, the majority of whom did not stock up ahead of the holidays. Most PP sellers had announced rollovers earlier in the month due to the absence of demand during most of August and the initially stable to softer trend tracked by the August propylene contracts, before they settled lower by €15/ton. As for September, sellers are apparently mulling over price hikes due to their expectations of comparatively better demand and plant shutdowns at some regional producers. A South European producer, who is pleased with buying interest so far, hinted this week that they are planning to raise their prices next month. "PP demand is good, several converters are looking for material for end August delivery as they are worried about any possible price hikes in September," a source at the producer claimed. A buyer reported receiving a €30/ton higher September offer from a West European producer who offers with short payment terms while he was warned by another West European producer that they will raise their PP list prices next month. The buyer, however, doesn't feel that producers will be able to pass their initial September increases. Indeed, buyers' doubts about higher September deals are partly supported by the stable to soft propylene outlook for September contracts. European naphtha costs, which had tracked the crude oil movements over the month, indicate a drop of over US$55/ton compared to the beginning of August. Crude oil prices, which have been volatile recently, have lost around US$11/barrel so far in August. Spot propylene prices across Europe have not shown any rebound over the month of August after having dived by around €100/ton at the start of the month. Following this major drop, spot prices are now standing more than €200/ton below the August contract level.