Weak demand weighs down Italy’s PP market
In Italy, the PP market witnessed further decreases this week, weighed down by stagnant demand and soft upstream costs. Many sellers issued additional discounts, complaining about facing difficulty in concluding deals, which pulled down the overall spot ranges by €10-20/ton on the week.
A distributor reported giving October offers €40-50/ton below September, but added that he could not manage to conclude any deals in the first half of October. Another distributor reported selling locally-held non-European PP with decreases of €80/ton from September after initially issuing smaller discounts of €50/ton, citing lethargic demand as the main reason behind his additional reductions. A different distributor also complained about sluggish demand in October despite approaching the market with larger decreases of €60/ton than the propylene contract drop of €40/ton.
Despite the general softer stance on the sellers’ side, buyers remain cautious about their purchases, projecting the current bearish trend to remain in place in the medium term. A compounder received offers for both European and non-European homo-PP at a single level, adding that the non-European offers suggested a larger cut. He commented, “We elected to buy only a small amount of Central European PP for now as we expect to find lower prices in the days ahead. We have already heard about homo-PP prices drawing near a new lower threshold.”
A converter reported buying small volumes of West European PP with discounts of €40/ton from September. He commented, “We also received offers from a Central European supplier with decreases of €30/ton, but did not accept them considering the revised levels to still be high. We think that the PP market will remain on a softer note considering ample supply.” Another converter, who obtained discounts equal to the monomer contract drop on his October gentlemen’s agreements, commented, “We expect prices to maintain their downward momentum until the end of this year.”
In addition to stagnant demand, softer upstream costs were cited as another reason exerting downward pressure on the PP market. Spot propylene prices on an FD NWE basis are slightly lower on the week, weighed down by lower naphtha costs. Spot naphtha prices on a CIF NWE basis declined by almost $20/ton compared to last week and they are suggesting an even larger drop of $40-50/ton when compared to the levels reported in the middle of September.