FocusNE Asia propylene traders take long position on rally hopes

01 February 2013 04:41  [Source: ICIS news]

By Peh Soo Hwee

SINGAPORE (ICIS)--Olefins traders are going long on propylene and buying March cargoes at higher prices in anticipation of a market rally after the Lunar New Year holiday, market sources said on Friday.

The recent spike in feedstock naphtha prices to above $1,000/tonne (€740/tonne) FOB (free on board) Japan and arbitrage deals to the US and Europe earlier this month also stoked the bullish sentiment.

Three propylene spot cargoes changed hands at $1,330-1,350/tonne FOB Korea for loading mainly in late March during the week.

These deals came on the heels of around 20,000 tonnes of propylene that were sold earlier this month partly at fixed levels of $1,360-1,370/tonne FOB Taiwan for loading mainly from late January to the first half of February.

The propylene cargoes are expected to head to Europe and US Gulf/Mexico where both planned and unplanned cracker shutdowns have propelled prices higher than market levels in Asia.

The above FOB NE Asia deals are currently almost at parity to propylene CFR (cost & freight) northeast (NE) Asia prices, which were assessed at $1,340-1,360/tonne at midday on 1 February, according to ICIS.

“There was no room to negotiate because of tight availability and several downstream plants coming on stream in the region,” one propylene trader said.

Exports from South Korea are expected to be reduced because of higher domestic demand.

Tongsuh Petrochemical is likely to start up its new 245,000 tonne/year acrylonitrile (ACN) plant in Ulsan in the first quarter of this year, with some market sources expecting the plant to come on stream by mid-February.

LG Chem has also started running its 420,000 tonne/year cumene plant in Daesan earlier this week, a company source said.

The increase of demand for propylene within South Korea would partly be offset by the start-up of GS Caltex’s vacuum gas oil (VGO) fluid catalytic cracking (FCC) around mid-March. The producer is expected to export the bulk of the propylene output estimated at around 250,000 tonnes/year.

However, several turnarounds at propylene units in the region in March-April could keep supply snug (see table below).

“We expect propylene prices to continue to move higher because of the tight supply,” said a regional producer.

Other traders were more risk-averse as buying momentum from the leading China market had tapered off ahead of the Lunar New Year holiday and it remains unclear how the outlook would be like after the festive season.

“The northeast Asia market is slightly firmer this week but buying propylene at $1,350/tonne FOB is not justified,” said another propylene trader.

“Demand from China is not so brilliant and there are still potentially a lot of cargoes from Japan,” he added.

Japanese producers have been selling propylene in the spot market as the country’s key consumer Nippon Shokubai is still awaiting approval from the government to restart its acrylic acid and super absorbent polymer (SAP) facilities in Himeji.

The units were ordered to shut by the government because of an explosion end-September last year, which included a 460,000 tonne/year acrylic acid plant and a 320,000 tonne/year unit for SAP.

There is currently no official word when the facilities will resume operations but market sources expect the restart dates to be at the end of March/April.

($1 = €0.74)

Table: Turnaround schedules in March-April

Month	Company Name	Location	C3 unit	Capacity	Turnaround dates
Mar	Formosa Petrochemical Corp	Mailiao, Taiwan	RFCC No 2	375,000	19 March to 21 June
	JX Nippon Oil & Energy	Osaka, Japan	FCC	70,000	mid-Mar to mid-April
	JX Nippon Oil & Energy	Mizushima, Japan	FCC (B)	90,000	20 March to mid-May
	JX Nippon Oil & Energy	Kawasaki, Japan	OCU	140,000	end-Mar to early May
Apr	CPC	Dalin, Taiwan	RFCC	400,000-450,000	End-April for two months
	Hyundai Oilbank	Daesan, South  Korea	RFCC	300,000	mid-April for one month
	Formosa Petrochemical Corp	Mailiao, Taiwan	OCU	250,000	26 April to 24 June

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

By: Peh Soo Hwee
+65 6780 4359

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