Higher feedstock cost and increased demand continued to buoy polypropylene prices in Northwest Europe this week, with rises in contract prices exceeding the January feedstock propylene pass-through of plus Eur20/mt ($26/mt), industry sources said.
Gross contract price settlements have converged at Eur1,265-1,270/mt FD NWE for homo injection so far in January, up Eur30/mt from December and a two-month high, according to Platts data.
Several producers said they had secured increases of at least Eur30/mt in their January contract prices. The upper end of the price hike range, however, has eased to Eur50-60/mt from around Eur70-80/mt last week as converters resisted steep increases due to the lack of a significant rebound in the end-user market.
Suppliers attributed the higher offtake to some restocking and moderate prebuying in anticipation of a larger price increase in February.
The market was well supplied, although some suppliers were heard to be reluctant to book February orders ahead of the monthly contract price settlement, expected before the end of the month.
Many converters were reported to have accepted contract price hikes of Eur20-30/mt, arguing that increases beyond this range was not justified by the current demand.
"Our own demand is flat. It's a bit better than December which is not surprising," a converter said.
SPOT PRICES SUPPORTED BY EXPECTATIONS OF STEEP FEB CP RISE
Expectation is growing in the market that producers will push for a larger price increase in February to recoup rising costs and boost margins.
Spot transactions were heard at around Eur1,100-1,160/mt FD NWE for homo injection. Transactions below Eur1,100/mt have disappeared, traders said, adding that mainly imported materials were at the lower end of the price range.
"There were attempts to prebuy at around Eur1,110-1,120/mt, but I would rather stop [selling] now and just wait," a trader said.
European producers were aggressively pushing offers at Eur1,150-1,160/mt due to less competition from imports, which have slowed because of the weak euro against the dollar, sources said.
PP producers have to break even at around Eur1,154/mt, based on the net propylene January CP and the cost of production and transportation. After taking into account a net PP contract price for January of around Eur1,192/mt, producers' margins were around Eur38/mt.
Upstream, naphtha has averaged $942/mt CIF NWE so far in January, up from December's average of $877/mt. It closed at $949/mt Wednesday, up from Friday's $932/mt.
This lifted spot propylene prices to Eur935-940/mt FD NWE Wednesday for polymer grade, up Eur35/mt from a week earlier and the highest since July 26, 2011.
