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Europe's PP demand outlook mixed on cheap feedstock, coronavirus

New York — Views on Europe's polypropylene demand outlook for April were mixed this week, with market participants expecting potential pre-buying due to lower feedstock costs but also fearing a drop in demand due to the coronavirus pandemic.

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The market was already expecting a significant drop in the April propylene contract price, following losses in upstream naphtha. The CIF NWE naphtha spot price hit its lowest since March 1999 on Monday at $126/mt, before recovering to $153.75/mt Tuesday.

Sources said this usually leads to pre-buying, as converters can take advantage of lower prices.

A source said upstream prices could rebound soon if producers cut run rates because of negative margins or shut units due to stricter measures to prevent the spread of the pandemic.

"If I had to buy, I would buy in April," the source said.

However, as uncertainty was growing due to an increase in the number of coronavirus cases in Europe, PP producers and converters were busy predicting what demand would look like next month.

"Too early to really think about pre-buying, we are looking for opportunities, but unless stocks are really high and producers offer a lot, we are probably going to wait," a buyer said.

Demand from the construction and automotive sectors was already hit, with factories shutting down and converters reviewing their order intake. Other sources said that despite this, demand for packaging and personal hygiene applications was above average, keeping PP prices relatively stable in March.

"It's a day-by-day business," a producer said, adding that April demand from all applications was likely to drop.

S&P Global Platts last assessed the PP homo injection spot price at Eur970/mt Tuesday FD NWE, stable on the day, but down Eur20 on the week.