FocusNE Asia propylene uptrend may fizzle out on weak demand

19 April 2012 04:28  [Source: ICIS news]

By Peh Soo Hwee

NE Asia propylene uptrend may fizzle out on weak demandSINGAPORE (ICIS)--Propylene prices in northeast Asia look set to end their strong uptrend as appetite for spot cargoes weakened amid a poor showing from derivative markets, industry sources said on Thursday.

Spot prices touched a fresh seven-month high of $1,500-1,560/tonne (€1,140-1,186/tonne) cost and freight (CFR) northeast Asia (NE) Asia during the week ended 13 April, according to ICIS data.

“We think that prices have peaked,” a South Korean olefins trader said.

Recent outages at the crackers of Taiwan's CPC and Japan's Showa Denko, as well as production issues at propylene units in the region, fuelled the spikes in propylene values.

But CPC restarted its 500,000 tonne/year No 5 cracker in Kaohsiung this week following an unplanned shutdown from 6 April, while some crackers in South Korea are also coming back on stream from scheduled maintenance.

Honam Petrochemical restarted its newly expanded 1m tonne/year cracker in Yeosu, South Korea, on 9 April following a turnaround since 1 March.

Yeochun NCC (YNCC) has also resumed operations at its Yeosu-based 578,000 tonne/year No 2 cracker late on 18 April. The cracker was shut on 20 March for scheduled maintenance.

Discussions in the FOB (free on board) Korea market had started showing a soft trend on 13 April, with deals heard at $1,470-1,480/tonne compared with fixtures done at up to $1,500/tonne in the first half of last week for May shipments.

Market sources said some Korean propylene producers are selling more propylene and maintaining derivative polypropylene (PP) production at below 100% capacity because of better margins from the sale of the monomer.

PP yarn spot prices were assessed at $1,470-1,500/tonne CFR China last week – lower than feedstock propylene values during the same period. PP makers typically need a spread of around $150/tonne with propylene prices to break even.

Propylene offers/selling ideas for spot cargoes arriving in May were at $1,540-1,560/tonne CFR NE Asia during the week but failed to entice buyers in the leading China market.

Chinese end-users said they could not afford to buy propylene at above $1,500/tonne CFR China as they would be making losses. In addition, domestic material was available at much cheaper prices.

“We have not imported propylene since end-February/early March because prices are too high,” said a propylene oxide (PO) producer based in eastern China. He said the company’s plant was running at a reduced rate of 70-80% capacity.

Domestic propylene prices were assessed at yuan (CNY) 10,300-10,400/tonne ($1,635-1,651/tonne) ex-tank Shandong on 18 April, which is the import equivalent of less than $1,400/tonne.

($1 = €0.76 / $1 = CNY6.30)

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

By: Peh Soo Hwee
+65 6780 4359

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