05 August 2010 05:21 [Source: ICIS news]
By Peh Soo Hwee
SINGAPORE (ICIS)--Asian propylene (C3) spot prices touched two-month highs this week as supply in the region tightened due to outages at Formosa Petrochemical Corp’s facilities in Taiwan last month, market sources said on Thursday.
Buying ideas climbed $70-90/tonne (€53-68/tonne) on the week to $1,150-1,170/tonne CFR (cost and freight) northeast (NE) Asia but end-users in the key China market said offers were scarce as traders retreated to the sidelines amid shrinking supply partly due to the outages, and also because some sellers focused their efforts on targeting sales to Formosa.
Market sources said the Taiwanese producer had purchased a regional cargo of C3 at $1,170-1,180/tonne CFR NE Asia this week for H2 August arrival. Selling ideas subsequently rose to above $1,200/tonne CFR NE Asia, with discussions underway, they added.
“The market has been eerily quiet for these two weeks and all the offers have disappeared,” said a Chinese polypropylene (PP) producer in Mandarin.
Formosa had shut its 700,000 tonne/year No 1 naphtha cracker at Mailiao in early July following a blast at the site and the plant was expected to resume operations only in late September/early October.
The producer was also forced to shut its 540,000 bbl/day refinery, along with a number of its downstream facilities on 26 July as a safety precaution, a day after an explosion at its 73,000 bbl/day desulphurising plant at the complex.
Mid-week, a Formosa company source said the derivative propylene units had yet to resume operations. The company operates an olefin conversion unit (OCU), which can produce 250,000 tonnes/year of propylene, and also runs two residual fluidised catalytic crackers (RFCC), with a combined propylene nameplate capacity of 650,000 tonnes/year, in Mailiao.
Expectations of further spot purchases by Formosa kept selling sentiment bullish particularly at a time when derivative demand was expected to pick up during the peak manufacturing season in the third quarter as factories gear up to meet Christmas orders for end-products ranging from toys to electronic goods.
“We already expected buyers in China to return to the market due to a ramp-up in derivative production but the Formosa incident and the spike in crude oil prices sparked the price increase faster than expected,” said an olefins trader based in Japan.
PP spot prices were on the rise this week, partly buoyed by concerns over the propylene feedstock shortage, market sources said.
Taiwan is a net exporter of propylene, with the bulk of exports coming from Formosa which supplies the feedstock to its derivative 450,000 tonne/year polypropylene (PP) plant and a 160,000 tonne/year crude acrylic acid (CAA) unit in Ningbo, China.
Propylene exports fell seven percent year-on-year to 547,032 tonnes in 2009, according to a country report on Taiwan that was presented at the Asia Petrochemical Industry Conference held in India in May this year.
($1 = €0.76)
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