FocusAsia PG to stay weak in September on sustained low demand

31 August 2011 05:13  [Source: ICIS news]

By Wong Lei Lei

SINGAPORE (ICIS)--Propylene glycol (PG) prices in Asia may remain flat in September, despite rising costs of feedstock propylene oxide (PO), amid continued weakness in downstream demand, industry sources said on Wednesday.

PG producers’ attempt to hike prices is being met with strong resistance from buyers, they said.

Spot prices for industrial grade PG (PGI) in northeast (NE) Asia and southeast (SE) Asia have held steady throughout August at $1,750-1,800/tonne (€1,208-1,242/tonne) CFR (cost and freight) SE/NE Asia basis, while PO prices rose by more than $100/tonne from end-July to $2,030-2,090/tonne CFR China on 26 August, according to ICIS.

Bearish demand in the downstream sector capped PG prices’ movement.

Production at the unsaturated polyester resins (UPR) industry - the main PGI consumer in China and most parts of Asia – has stayed low since June, translating to much lower demand for PGI, market sources said. UPR is used in the manufacture of fibreglass.

“The unsaturated polyester resins [plants in China are] only running at 50-60% [of] production capacity now,” said a Chinese buyer.

Margins have been squeezed so thin for PGI producers, that a major north Asian maker stopped producing the material.

“PGI prices are so low now even though PO prices remain high. It is no longer attractive enough for me to stay. I think I will not be selling any PGI till next year,” the producer said.

The producer is currently limiting itself to producing pharmaceutical grade PG (PG USP), which continues to enjoy good demand.

“The PG USP demand from buyers is steady, despite the current weak global economy and lacklustre PGI market, as PG USP is used in the food and pharmaceutical sectors that have relatively stable demands,” said another producer.

PG USP spot prices were assessed at $2,050-2,100/tonne CFR NE Asia, largely unchanged for the whole of August, according to ICIS.

($1 = €0.69)

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

By: Wong Lei Lei

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