Lower prices for Brent crude oil, propylene monomer, signs of softening in homo-injected PP prices, expectation of decline in BOPP prices bodes well for plastic film buyers, converters in H2 2012, consultant predicts

LOS ANGELES , July 4, 2012 () –

Both buyers and converters of plastic film face a promising second half due to lower prices for Brent crude oil, propylene monomer, homo-injected polypropylene (PP), and bi-axially oriented polypropylene (BOPP), said a consultant, reported Packaging News on July 4.

BOPP prices are expected to weaken due to oversupply and lower input costs, said Liam Barbary, founder of Benchmark Consulting, a new business offering consultancy on plastic packaging costs.

BOPP production was raised in 2011 due to an unstable market for polyethylene terephthalate (PET) in 2010 and 2011, and more is becoming available from the Middle East, he said.

There was a shift in using BOPP, but now there are reports that demand for non-food applications has softened, which along with oversupply conditions, is expected to pressure prices downward, said Barbary, Packaging News reported.

Between fourth-quarter 2011 and first-quarter 2012, BOPP prices increased by 6% to €1.80 (US$2.26) per kilogram and rose further to €2.10/kg in second-quarter 2012. This was attributed to inventory building, especially in snack and confectionery, ahead of the Olympics.

May was the first month in a while where prices for homo-injected polypropylene weakened, dropping by 1%, after steadily rising to €1,540 per tonne in April, according to Barbary, reported Packaging News.

Major producers of propylene monomer report that the market is weak and inventories are high, said Barbary.

Cracker profits are still strong, leaving room for downward pressure on prices. In July, the first contracts for propylene were settled at about €160/tonne lower than on May 12, which should bring June propylene prices to €930-€940/tonne.

Meanwhile, Brent crude oil hit an 18-month low at the end of June. This price, which was about US$90 per barrel, follows a price peak of $124/barrel in March 2012. Experts expect a continued decline due to softening Asian demand and uncertainty about the Eurozone recovery, Packaging News reported.

The primary source of this article is Packaging News, London, England, on July 4, 2012.

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