Price and market trends: Asia propylene prices hit 15-month highs and could rise further

28 June 2013 10:00  [Source: ICB]

After hitting a 15-week high, prices could increase further on strong demand and tight supply in China

Asia's propylene (C3) prices are currently trading at a 15-week high and may continue heading north in the near term on the back of China's strong buying appetite and tight regional supply, industry sources said.

On 18 June, selling ideas for July shipment were heard at $1,400/tonne (€1,050/tonne) CFR (cost and freight) NE (northeast) Asia or higher, although most buying ideas were quoted at the high-$1,300/tonne CFR NE Asia levels.


 Nippon Shokubai's acrylic acid plant is set to restart soon

Copyright: PA

In the week ended 14 June, propylene prices were assessed at $1,370-1,380/tonne CFR NE Asia, up by 3% from early March, according to ICIS data.

Spot cargo availability in Asia is tight because of scheduled turnarounds at regionals crackers, heightening the pressure for propylene prices to rise, sources said.

Formosa Petrochemical Corp's (FPCC) No 2 residual fluid catalytic cracker (RFCC) in Mailiao, Taiwan, has been shut since 19 March, and will be restarted by the end of June. The RFCC can produce around 375,000 tonnes/year of propylene.

FPCC's olefins conversion unit (OCU) at the site - down since late April - is expected to resume production by the end of the month after completing maintenance, a company source said. The unit has a nameplate propylene capacity of 250,000 tonnes/year.

"So we don't have spot availability for July since our units were under maintenance for such a long time," the company source said.

Another Taiwanese producer CPC Corp plans to shut down its new residual fluid catalytic cracker (RFCC) at its Dalin refinery in August for a two-month turnaround, a company source said. CPC's RFCC can produce 400,000-450,000 tonnes/year of propylene.

The company will have to fulfil contract supply to its domestic customers and will not have spot volumes for export in July, the company source said.

Meanwhile, expectations of reduced propylene exports from Japan further raised concerns about a scarcity in spot cargoes in Asia, market sources said.

"The supply from Japan will be probably cut in coming weeks if Nippon Shokubai restarts its plant," a regional trader said.

Propylene is the key feedstock in the production of acrylic acid and acrylate esters. Japan's Nippon Shokubai is likely to restart its 80,000 tonne/year acrylic acid (AA) line at its Himeji facility by the end of June, a source said.

The company recently restarted its 160,000 tonne/year AA line at the site in early June after receiving approval from the government.

Nippon Shokubai's total AA capacity at the site is 460,000 tonnes/year. It is also widely expected to resume production at its acrylate esters facility in the next one to two months, market sources said.

Some sellers and traders in South Korea have sold out their July shipments a few weeks ago, causing Chinese buyers sitting on low inventory to pay higher prices to secure cargoes.

Very few offers were heard in the market as sellers with cargoes are not rushing to sell in anticipation of higher prices, although most buying ideas were below $1,400/tonne CFR NE Asia.

In China, domestic propylene prices in Shandong were at yuan (CNY) 10,100-10,200/tonne ex-tank on 17 June, up by CNY150/tonne from 14 June given scarce supply from local refiners, according to ICIS Chemease.

In the near term, the market outlook for propylene looks rosy, but most market participants were cautious, saying the uptrend could be limited if demand fails to improve.

"The key [downstream] PP [polypropylene] demand is still not strong. If PP manufacturers could not pass on the cost, some manufacturers will have to shut down plants," a trader said.

By: Judith Wang
+65 6780 4359

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