FocusAsia PO prices to rise in Q2 on tight supply - sources

23 February 2010 04:18  [Source: ICIS news]

By Ong Sheau Ling

SINGAPORE (ICIS news)--Asia propylene oxide (PO) spot and contract prices are expected to rise in the second quarter owing to the expected tight supply in the northeast caused by upcoming turnarounds, market sources said on Tuesday.

Five PO facilities are expected to be shut for maintenance in 2010. (please see table below)

"Japanese PO supply tightens in May and June as both AGC and Nihon Oxirane (NOC) are shut in the same time frame for maintenance," an Asahi Glass Co (AGC) representative said.

AGC would minimise its exports during the turnaround so as to cater to the domestic needs, the representative added.

In the Japanese domestic market, offers for first quarter contracts had risen yen (Y) 10-15/kg ($0.11-0.16/kg) from fourth quarter 2009 levels of Y140-180/kg due to firm costs of upstream naphtha. PO producers said second quarter contract prices would gain further ground with the addition of snug availability.

SKC Co, South Korea’s sole PO producer, is undergoing a one-month turnaround and the company said its exports would be reduced due to low inventory levels.

February offers in the South Korean domestic market had risen won (W) 250/kg ($0.22/kg) over January levels of W2,050-2,400/kg due to limited supply and earlier hikes in feedstock costs.

"In both the Japanese and South Korean domestic markets, contract prices were talking at higher numbers. Similarly, spot export cargoes to China were discussed at elevated levels," a Japan-based trader said:

In China, PO supply had tightened since early February as CNOOC & Shell Petrochemicals Co (CSPC), the country’s largest PO producer, was preparing for a March maintenance, market players said.

Buyers were worried that despite sluggish demand from downstream sectors, the tight supply of PO would boost prices in both the domestic and import Chinese markets, market players added.

"It will get more expensive to buy PO. If downstream polyols do not move up in tandem, we will lose margins," a China-based polyols producer said.

A northeast-Asian seller said: "We are likely to rollover March shipment from February as the Chinese just returned to the market and might resist any price change. However, in April, we will offer higher to reflect the tight market."

According to market players, spot sales in February were largely concluded at $1,480-1,550/tonne (€1,080-1,132/tonne) CIF China while March delivery offers for northeast and deep-sea cargoes were cited at up to $1,580/tonne CIF China.

China domestic prices were stable over the previous week at yuan (CNY) 12,700-13,200/tonne ($1,859-1,933/tonne) DEL China, according to global chemical market intelligence service, ICIS Pricing.

Propylene oxide is used as an intermediate for the production of numerous commercial materials. The largest derivative of PO is polyether polyols, one of the main components used in the manufacture of polyurethanes (PUs) which are used in applications such as rigid foam installation and flexible foam seat cushions.

PO Turnaround Schedule 2010

* PO/SM (styrene monomer) unit
** HPPO (hydrogen peroxide to PO) unit

($1 = Y91.48 / $1 = W1,147.30 / $1 = €0.73 / $1 = CNY6.83)

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Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Ong Sheau Ling
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