FocusCracker cuts boost Europe's C3 market

08 October 2008 13:00  [Source: ICIS news]

By Nel Weddle

 

LONDON (ICIS news)--A combination of cracker cutbacks and planned and unplanned outages were helping the European propylene (C3) market to withstand a slowdown in demand, market sources said on Wednesday.

 

“Its [currently] tightish, with all the reductions on the cracker its becoming more rare [and] people are now willing to pay,” said one producer.

 

However, it added that it was difficult to assess whether the more bullish sentiment was due to cautiousness on the part of sellers or really a lack of free volume.

 

So far, propylene appeared to be bucking the current downtrend seen across the majority of chemical markets, able to hold its own because of the “disaster” on ethylene, some players said.

 

Ethylene oversupply due to poor demand, notably from the polyethylene (PE) sector had led to operating rate reductions at several crackers across Europe, players said.  

 

This had tightened propylene output at a time when a number of refinery-based fluid catalytic crackers (FCCs) were on maintenance turnarounds.

 

An unplanned issue at another northwest Europe FCC had added to sellers’ reticience to sell volume, which led to some unexpected demand for chemical grade propylene.

 

However, most sources still described the market as balanced.

 

A tighter situation existed in southern Europe, sources said, because of planned cracker maintenance at plants in Priolo, Italy, and upcoming work at a unit in Tarragona, Spain, while FCCs in La Mede, France and La Coruna, Spain, were also currently undergoing a turnaround.

 

However, some market observers said the outlook was definitely bearish amid expectations of imports from Russia, South America and Asia.

 

“We are getting more and more approaches from Asia for C3 imports” said a trader, adding “we should see imports from Brazil in November and December”.

 

“It was a short peak, the unexpected demand is over,” added the trader.

 

One seller said that now that players had had a chance to assess demand needs for October, the market was looking definitely more balanced to long. This could change for the worse, as the outlook for the key propylene derivative polypropylene (PP) was not good, added the seller.

 

“There’s no doubt that supply [of propylene] has been reduced but the speed at which we are reducing PP production fast outpaces that,” said one major integrated PP producer. “We have sizeably reduced PP production and our system is longish.”

 

“We are doing the same as everyone else - having to manage inventory very well,” it added.

 

Spot prices were, for the moment, holding around contract value, according to buyers and sellers.

 

Fourth-quarter contracts settled at €953/tonne ($1,305/tonne), down €62/tonne. 

 

“There is definitely no room for spot prices above contract value,” a source said.

 

Openly reported deal activity had been thin on the ground over recent weeks but deals for both chemical grade and polymer grade had this week been reported in the low to mid-€900s/tonne CIF (cost insurance freight) NWE (northwest Europe), according to global market intelligence service ICIS pricing.

 

Sources added that the real concern was not October supply and demand but what the situation would be at the end of November and December, when demand traditionally slows down for the year-end seasonal holidays.

 

“That’s the real scary part,” a derivative producer said.

 

 ($1 = €0.73)

 

For more on propylene visit ICIS chemical intelligence

To discuss issues facing the chemicals industry visit ICIS connect

 

 

 

By: Nel Weddle
+44 20 8652 3214

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