FocusChina PP may hit $1,700/t on feedstock

21 May 2008 04:25  [Source: ICIS news]

By Chow Bee Lin

SINGAPORE (ICIS news)--Polypropylene (PP) prices in China were expected to reach a fresh 10-year high of $1,700/tonne by the end of May or early June on surging feedstock costs and tight supply, Asian producers said on Wednesday.

“With propylene feedstock costing $1,500/tonne (€960/tonne) CFR (cost and freight) northeast Asia, we expect to see injection and yarn grade PP rising to $1,700/tonne CFR China,” one of the producers said.

“We expect crude prices to hit $135/tonne in June or July due to the US driving season, and hence naphtha to rise to $1,200/tonne CFR Japan, and propylene feedstock to rise further as a result,” he added.

NYMEX light sweet crude futures settled on Tuesday at a record $129.07/bbl, up $2.02 from Monday, as the front-month June contract expired. The June contract also set a record intraday high at $129.60/bbl.

The general bullish sentiment for PP was also supported by the perception that many importers in China had low inventories.

“Many China importers didn’t buy in March and April because they thought prices were going to fall, so now they have very low stocks,” a second producer said.

China’s homopolymer PP imports for the first quarter fell to 593,289 tonnes, 27% lower from the same period a year ago, according to China Custom data.

The tight PP supply in China was also due to local plant shutdowns in April and May for scheduled maintenance, technical glitch or feedstock propylene shortage, traders said.

Some local refineries had reduced their operating rates to cut losses arising from soaring crude prices, and hence the output of propylene as a by-product had fallen, traders said.

The supply of biaxially oriented PP resin was also limited by the lack of US product offered to Asia in the recent months, they added.

Injection and yarn grade PP prices were assessed at $1,640-1,650/tonne CFR China for the week ended 16 May, $20-40/tonne higher from the previous week, according to global chemical market intelligence service ICIS pricing.

Major PP suppliers exporting to China include Formosa Plastics, Honam Petrochemical, Samsung Total and Basell.

($1 = €0.64)

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