FocusChina PP makers suffer margin squeeze from C3 price spike

11 July 2013 11:42  [Source: ICIS news]

By Amy Yu

Focus: China PP producers suffer margin squeeze from propylene price spikeSINGAPORE (ICIS)--Some Chinese polypropylene (PP) producers have been incurring losses because of continued spike in feedstock propylene (C3) prices since May, while poor domestic demand prevents sellers from raising offers by much, industry sources said on Thursday.

Distributors in China raised their offers for domestic PP yarn grades to CNY10,400-10,850/tonne ($1,697-1,770/tonne) ex-warehouse (EXWH) on 11 July, market sources said.

Current PP offers represent a 1% increase from end-April, while prices of feedstock propylene have increased by more than 7% over the same period, according to ICIS data.

Propylene prices were assessed at $1,400-1,410/tonne (€1,092-1,100/tonne) CFR (cost and freight) NE (northeast) Asia at the close of trade on Thursday.

Chinese PP producer Xuzhou Haitian has yet to restart its 200,000 tonne/year unit in Jiangsu province, prolonging the unit’s shutdown to stem losses amid surging production costs, a company source said.

The plant was taken off line for maintenance on 10 June and was supposed to restart at the end of last month.

In Ningbo, Formosa Plastics Corp’s (FPC) 170,000 tonne/year PP unit at Beilun is currently undergoing maintenance that will last 20 days from 1 July. Its PP output in July is expected to fall by a third, a company source said.

Smaller producers are hurting from surging propylene prices, but integrated producers operated by CNPC and Sinopec can still enjoy relatively lower production cost as these produce their own propylene for captive use, industry sources said.

Those that use coal-to-olefins (CTO) technology such as Datang International, Ningxia Shenhua and Baotou Shenhua, meanwhile, have bigger cost advantage over oil-based PP producers, they  said.

Nonetheless, all these PP producers may consider cutting production if prices of their product failed to increase in tandem with those of feedstock propylene, industry sources said.

($1 = €0.78 / $1 = CNY6.13)

Additional reporting by Summer Zhang

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

By: Amy Yu

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