FocusChina PP up on low supply, high naphtha

09 May 2008 05:00  [Source: ICIS news]

By Chow Bee Lin

SINGAPORE (ICIS news)--Polypropylene (PP) prices in China are up as much as 3.8% as buyers in Asia’s largest market scramble to source adequate supplies amid high propylene feedstock and naphtha costs, buyers and sellers said on Friday.

Spot prices were up by $50-60/tonne (€33-39/tonne) above the mainstream transaction prices for May/early June shipment at $1,620-1,630/tonne CFR (cost and freight) China transacted this week, producers and traders said.

A few hundred tonnes of injection and yarn grade PP were sold at the higher levels directly by two Asian producers, setting the stage for the rest of the market to follow.

Rising domestic prices also boosted buying sentiment and led Chinese importers to take positions at higher prices, traders from the country said.

After keeping prices stagnant for weeks, key Chinese producers raised domestic prices this week due to depleted inventories, record high crude and naphtha prices, and anticipation that PP supply would remain tight in the rest of the second quarter due to local plant turnarounds, the traders said.

As crude oil prices hit fresh record levels above $120/bbl, regional PP producers sought to raise resin prices in anticipation of higher propylene costs.

“With propylene trading around $1,450/tonne CFR Asia, regional PP producers will have to shut their plants if they can’t achieve higher PP prices,” an Asian producer said in Mandarin.

“PP has to command a minimum premium of $200/tonne over propylene for PP producers to be viable,” he added.

Regional producers’ bargaining position was strengthened after major Korean PP maker Polymirae was forced to shut its plants due to a sudden disruption in propylene feedstock.

Polymirae’s unexpected outage had no major impact on regional supply on the whole, but that contributed to the regional supply concern as several plants in Asia were also scheduled to shut for turnaround in the second quarter, an Asian trader said.

Asian PP resins processors were bracing for tougher times ahead as many had not been able to pass on the higher raw material costs to their downstream end-users, a Southeast Asian processor said.

“Our second quarter contracts with downstream end-users were signed in March when raw material prices were much lower, so we can’t pass on any raw material price hikes that occur in April, May and June,” the processor said.

Injection and yarn grade PP and biaxially oriented PP (BOPP) were assessed at $1,560-1,580/tonne CFR China for the week ended 2 May, according to global chemical market intelligence service ICIS pricing.

Asian naphtha prices traded at a new record high of $1,002/tonne boosted by rising crude values.

($1 = €0.65)

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By: Chow Bee Lin
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