The highly volatile oil market has kept most European polypropylene traders from taking advantage of the arbitrage window from Asia, industry sources said.
Despite the rebound in Asian prices so far in March following the declines in February, there remained a wide gap between CFR Far East levels of $1,417/mt (Eur1,072/mt) on Thursday and European prices, which in contrast were on a steady ascent since the start of the year, propelled mainly by soaring feedstock costs and a pick-up in demand.
PP prices in Europe reached Eur1,320-1,325/mt FD NWE Thursday, up Eur20/mt from last week and the highest in nine months, according to Platts data.
PP imports from the Far East are mostly subject to 6% duty in Europe.
This, plus freight cost of around $100-120/mt, will translate into a landing price in Europe of around $1,612/mt, equivalent to Eur1,220/mt.
A trader said that even at this price level, which has yet to take into account a mark-up of around Eur30-40/mt, imports from Asia remained an unattractive option because of the long transit time of at least four weeks.
"It's still a dangerous situation. With the volatile oil prices, [European PP prices] can easily drop quite dramatically and you might get stuck with a very expensive cargo," he said.
Another trader agreed: "There's no sense bringing Asian product into Europe. Most buyers don't like the long transit time." A supplier said purchasing from the Far East involves an "awful lot of risk."
"Once an order is placed, it will take at least four weeks to get here...and the market can easily fall away within that time," he said.
European PP prices have already rallied by Eur285/mt, or over 27%, since the start of the year, according to Platts data.
ASIAN PP SEEN MOVING MOSTLY TO AFRICA, INDIA INSTEAD
Asian PP traders are inclined to move cargoes mostly to Africa and India instead.
"We did not offer any cargoes into the China market for March shipment but we offered to the Africa, Europe and India market," a trader said.
There is a strong demand in India, where supply is expected to tighten ahead of the plant turnarounds in April.
Indian producers increased domestic prices by Rupees 2,000/mt ($40/mt) on Thursday, the second time this month, on higher demand and the depreciation of the Indian rupee against the dollar. The currency has fallen 2.4% against the dollar since March 1 to settle at Rupees 50.41 Friday.
Indian local producers last increased their domestic prices by Rupees 2,000/mt ($40/mt) on March 1.
PP prices were assessed at $1,450/mt CFR South Asia on Wednesday.
In North Africa, PP prices were also moving higher, with availability expected to be constrained by plant maintenance shutdowns in the Middle East, sources said.
PP homo injection/raffia prices in the region were at $1,500-1,505/mt CFR Alexandria on Wednesday, the highest since October 5, Platts data showed.
SABIC's 320,000 mt/year PP plant at its Al Jubail site in Saudi Arabia was shut last week for a week-long turnaround and is expected to restart in the next few days.
