FocusAsia propylene slips from 15-month high

19 February 2008 04:34  [Source: ICIS news]

By Kew Jia Hui

SINGAPORE (ICIS news)--Asian propylene prices – which hit a 15-month high last month - are expected to fall further after slipping by at least $40/tonne last week, due to a sudden influx of Taiwanese material, traders and end-users said on Tuesday.

Propylene prices were assessed at $1,200-1,220/tonne (€816-830/tonne) CFR (cost and freight) NE (northeast) Asia on Friday, according to global chemical market intelligence service ICIS pricing.

This was a drop of at least $40/tonne from the high in mid-January.

The price fall was triggered by news of a delay in major producer Formosa’s downstream polypropylene (PP) plant in Ningbo, China. An additional 20,000-30,000 tonnes of propylene would flood the market in March, a trader estimated.

Japanese producers were also facing inventory pressure due to slow uptake rates from domestic downstream plants. Some PP plants were operating on reduced rates as low export prices resulted in squeezed profit margins.

Trades to major buyers in China and Taiwan had also slowed in past weeks due to a wide buy-sell price gap, adding to the inventory woes at Japanese producers. Traders, under pressure to sell off cargoes, began reducing their offers to attract sales.

All eyes were now fixed on Chinese market, with many traders awaiting trades to restart after the lengthy Chinese New Year holiday lull in early February. Sellers bore hope that demand in that country would pick up rapidly and absorb the large volumes of cargoes in the market.

Chinese end-users, however, said they were still taking stock of the local demand and supply situation.

With production in most downstream sectors yet to fully resume, and lower-priced domestic cargoes available, buyers said a clearer picture of the demand situation would only emerge in the next two weeks.

Producers such as Mitsubishi Chemical and Taekwang Industrial, who were purchasing March cargoes to cover requirements due to outages and turnarounds, were also said to be buying less-than-expected volumes.

Taekwang Industrial had brought forward its propane dehydrogenation (PDH) unit turnaround, reducing its need for March volumes while Mitsubishi Chem was rumoured to be restarting its plant in end-March or April.

Southeast Asia was similarly well-supplied due to an influx of non-Asian material. Several cargoes of Indian, Iranian and Venezuelan origin sold to end-users in the past month had eased the tight supply situation in the region.

“Bringing the excess cargoes from northeast Asia into southeast may work out,” said a trader, who bought a cargo from the Taiwanese producer last week.

However, another Japanese trader said this movement may be limited by the tight shipping space on time-charter vessels. 

“Both northeast and southeast seems well-supplied. Propylene prices will come down simply because there is too much cargoes now and traders are under pressure to sell,” said a trader who predicts offers to emerge below $1,200/tonne.

($1 = €0.68)

For more on C3 visit ICIS chemical intelligence

By: Kew Jia Hui
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