Europe PP buyers paying huge hikes in March

Polypropylene (PP) buyers in Europe are paying more increases in March, up to €130/tonne ($171/tonne), and are being warned of further hikes in April with some producers pushing for higher rises than others, market sources said on Tuesday.

Homopolymer injection prices are trading in a wide range, at around €1,350–1,400/tonne FD (free delivered) NWE (northwest Europe) on a net basis in March, from a low barely above €1,000/tonne FD NWE in December.

“We are finding it increasingly difficult to pass on these increases,” said one large PP buyer. “It’s tough out there, and I know they have their bottom line to look after but it’s not easy.”

One major producer agreed. “We have to give our converters some time to recover. Either they recover or go bankrupt,” it said.

“Do we push the market hard while we still can, or show some restraint?” said another, commenting more on which approach it would take in April rather than March, as sources are already gearing up the market for a propylene, and hence a new PP, increase.

However, another PP producer is far more bullish: “Our cut-off point is plus €130/tonne, and no less. Underlying demand is good and we closed our order books a few days ago.”

Some early March buyers managed to get away with a €90/tonne increase, reflecting the increase in the March propylene contract, but such numbers have not been available to buyers for a couple of weeks, and then from only a limited number of suppliers. Accounts that have not yet settled for March are discussing increases of €110/tonne, with some holding out for a €100/tonne increase.

Many buyers feel that prices have reached the top of the current cycle, citing the probability of increased imported volumes as European price levels rise ever higher, and the continuing weakness of the European economy.

They expect a re-run of 2011, when prices collapsed during the second half of they year, only to begin recovering in January 2012.

“We won’t see a repeat of 2011,” said one of the producers. “Inventories are low with producers and crude oil and naphtha prices are high.”

Last week, however, crude prices dipped by $4/bbl in one day, recovering later to remain around the $124/bbl mark.

“I am keeping a close eye on crude,” said another buyer. “They have recovered the upstream costs this year and if crude falls below $124/bbl for any length of time, I want this reflected in my [polymer] prices.”

PP pricing for March is largely settled, with late accounts discussing increases of €100–130/tonne, but if expectations of an increase in the April propylene monomer contract materialise, there will be more pressure on buyers next month.

PP production has been curtailed in recent weeks, for commercial reasons but also because of propylene supply problems.

“It’s true that the current market situation has to do more with production issues. It’s more tightness of supply than extra high demand, but in April we will for sure not give away any margin,” said a producer.

PP is used widely in packaging, and also in the automotive and household goods sectors.

($1 = €0.76)