Tight Korean supply raises propylene rates

08 April 1996 00:00  [Source: ACN]

PROPYLENE prices have soared above US$500/tonne cfr SEA as unexpected plant reductions in South Korea exacerbate already tight supply. Spot purchases have already reached US$530/tonne cfr Indonesia and US$420/tonne fob Korea as PP producers scramble for material. Offers are now US$580-600/tonne cfr SEA and US$470-480/tonne fob Korea.

South Korean supply was unexpectedly reduced by a ten-day unscheduled shutdown at Honam Oil Refinery's fluid catalytic cracking unit in March. In addition, Tongyang Nylon's cracker has been forced to operate at 80% because of poor downstream demand for ethylene glycol.

Yukong will have no material for export until July as it is supplying other South Korean cracker operators with propylene in time-swap agreements. Its own cracker will have scheduled maintenance in October.

Sabic has had almost no propylene for export to Asia since it started 2-ethylhexanol production late last year. Deep-sea availability from the US, Brazil and Mexico is also severely limited, said traders.

Import tariffs for PP are helping the propylene hikes. India has a 40% tariff and 25% duty on PP which would allow buyers to pay above market levels for propylene and still produce PP profitably, a source said.

Reliance Industries has already purchased propylene ahead of the expected May-June commissioning of its new 180 000 tonne/year PP plant at Hazira, Gujarat, but may be unable to secure sufficient material to start up and operate in Q2's tight markets.

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