China PP rises $40/tonne on C3 supply concern

03 August 2010 12:36  [Source: ICIS news]

SINGAPORE (ICIS)--China’s polypropylene (PP) prices have risen by at least $40/tonne this week as buyers restock in anticipation that high propylene (C3) feedstock prices will push regional PP up in the coming weeks, industry sources said on Tuesday.

“Many buyers, including our company, are stocking up because we believe the recent fires at Formosa’s upstream facilities will cause propylene feedstock prices to soar on tight supply in the coming weeks, and that PP prices will rise in tandem,” a key trader in east China said, echoing the views of other traders in Asia.

He was referring to separate fires at Formosa Petrochemical Corp’s (FPCC) No 1 cracker and desulphurisation unit in July.

An Indian producer sold a few thousand tonnes of injection- and yarn-grade PP at $1,210/tonne (€920/tonne) CFR (cost and freight) China earlier this week for September shipment, which was at least $40/tonne higher than last week’s transaction levels, Chinese traders said.

Benchmark injection- and yarn-grade PP were transacted at $1,130-1,170/tonne CFR China for the week ended 30 July, $20/tonne higher from the previous week, according to ICIS data.

The PP price uptrend was also a natural correction following persistent declines in the past 10 months, said a source at Formosa Chemicals & Fibers Corp (FCFC).

“China’s PP import prices started rising last week after bottoming out two weeks ago. The fires at Formosa’s facilities were just a catalyst to the price hikes,” the FCFC source said.

Many South Korean producers said they were holding back offers as they expected to see higher propylene feedstock costs in the coming weeks due to the outages at Formosa’s upstream facilities.

“We’re expecting higher spot propylene feedstock prices going into September, but we’re not sure how high the prices will go. And we’re not offering PP for September shipment until we’re more certain about our feedstock cost,” said a source at Daelim Industrial.

South Korea and Taiwan are major PP exporters to China.

($1 = €0.76)

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By: Chow Bee Lin
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