FocusAsia C3 at 15-month high on tight supply

10 January 2008 04:42  [Source: ICIS news]

By Kew Jia Hui

SINGAPORE (ICIS news)--Asian propylene – already at a 15-month high– is poised for more gains on tight spot supply as producers cut back operations amid high feedstock naphtha costs, industry sources said on Thursday.

Propylene, which is above $1,300/tonne (€884/tonne) CFR (cost and freight) Asia currently, may rise until March, they added.

Cracker operators had cut production rates as continually high feedstock naphtha costs severely eroded their margins. Open spec naphtha prices in Asia had been hitting fresh highs this year, largely due to crude’s record-breaking rally.

"We have scaled back operations as with naphtha costs this high, it’s not worth running at full rates," a cracker operator in Thailand had said earlier, referring to production cutbacks of several percentage points.

Production problems at some plants exacerbated the tight supply situation, turning some producers into spot buyers as they scrambled to cover their contract commitments.

Mitsubishi Chemical’s fire-hit cracker in Kashima and CPC’s FCC unit in Kaohsiung remains shut with restart dates uncertain while other cracker operators such as Indonesia’s Chandra Asri and Japan’s Idemitsu Kosan had slashed production rates due to mechanical and feedstock woes.

Despite difficulty in securing spot cargoes in a market with limited availability, buying sentiment for propylene remained strong. With downstream polypropylene (PP) demand still robust, the need for feedstock propylene did not look to diminish in the next months, traders said.

Propylene prices hit a 15-month high at $1,280-1,300/tonne CFR SE (southeast)Asia last week, according to global chemical market intelligence service ICIS pricing, as demand outstripped supply in a market with limited availability.

The uptrend in Asia mirrored propylene price increases in both Europe and the US.   

The US polymer grade propylene (PGP) contract in January were increased by 0.5 cents/lb from December, the fifth record-breaking settlement since August while first quarter prices in Europe rose €57/tonne.

Price increases in both regions were attributed to soaring feedstock and crude oil prices.

However, the uptick in propylene prices in Asia was likely to slow its increase due to strong buyer resistance, said a key Chinese buyer.

“The Chinese domestic market is not doing too well now and many downstream buyers are resisting the higher offers. The buy-sell gap is too great and negotiations for cargoes have halted to almost a stop,” he added.

Another Indonesian PP maker echoed the sentiment.

“The price difference between propylene monomer and PP has narrowed by quite a bit over the past two months. PP prices had stopped increasing and we cannot keep buying higher-priced monomer cargo,” he said.

($1 = €0.68)

By: Kew Jia Hui
+65 6780 4359

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly