Premium of NWE polypropylene to propylene near all time high amid tight supplies

11-Dec-15

Amid tight supplies, the premium of the Northwest European polypropylene contract price to the propylene contract price widened to Eur530/mt (US$581/mt) in December, slightly off the all-time high of Eur537.50/mt in July, as per Platts. Platts assessed PP contract prices Wednesday at Eur1,200/mt FD NWE, up Eur32.50/mt from the end of November, despite the rollover in the propylene contract price for December at Eur670/mt FD NWE. A producer said that increases for December were at Eur30-90/mt, attributing this to both healthy demand and tight supplies. "We are overflowed by demand. Inventories were low [in the chain], converters are making good margin [too]," a producer said. The PP premium to propylene touched its record high in July amid "unprecedented number" of outages in the European market. Sources said the after effects of the mid-year tightness have remained in the market, with inventories in the value chain low. LyondellBasell said in mid-November that it expected a shortfall in its ability to meet PP demand over the coming months, according to a letter to its customers. This shortfall is a result of strong market demand, a propylene shortfall in its German assets due to low Rhine river levels, and upcoming major planned outages at several of its large plants. Turkish and North African sources said the demand outlook was gloomy as the year-end approached, adding that the bullishness in Europe defied fundamentals in other regions.