Italian PP buyers reluctant to pay hikes of more than propylene

5. Mar. 2010

In Italy, there are price hikes of up to €75/ton sought in the PP market both for spot business and gentlemen's agreements. Sellers are justifying their large hike targets for another month by mainly pointing to the €35/ton higher settlement of the monthly propylene contract. They also need to improve margins amidst tight propylene availability, they argue.

However, buyers who already faced large price hikes of €70-100/ton in February appear reluctant to concede to any hike of more than that of the propylene contract. They are bidding for €30-35/ton increases at maximum. Demand for PP applications has failed to show a revival so far with converters continuing to complain about the sluggishness of their end product markets and their difficulty in passing their rising costs onto their downstream customers. As was the case for the past few months, they are planning to keep their purchases to their basic requirements amidst rising prices.

Accordingly, the rising trend in the PP market is expected to be kept in check with the slow demand in Italy during March. Although the theoretical cost of producing PP is nearing €1100/ton based on propylene both on spot and gross contract basis, the spot homo PP market has not able to pass this threshold at the low end since February due to low demand. Some PP buyers still hope to find offers slightly below this level for large quantities in the later days of the month while much lower offers at €1030-1070/ton that emerged in Turkey on CFR basis last week also indicate the dullness of the PP market in Europe.
[chemorbis]