Tight Europe propylene supply lifts spot prices

10 January 2014 13:33  [Source: ICIS news]

LONDON (ICIS)--Tight supply in the European propylene market has lifted polymer grade propylene (PGP) spot prices to the contract value for the first time since September 2013, market sources said on Friday.

Supply, primarily in northwest Europe (NWE), has tightened on a combination of better-than-expected contractual demand and production issues, chiefly related to Total Petrochemical’s strike-related refinery outages in December. Technical issues at the facility, located in Gonfreville, France are said to persist, and issues have also been heard regarding Total’s site in Antwerp, Belgium. The company declined to comment.

Meanwhile, the propane dehydrogenation (PDH) unit operated by Borealis at Kallo, near Antwerp in Belgium is heading into a seven week maintenance turnaround.

Bad weather in the Bay of Biscay, and storms across NWE in general, have also led to some loading delays, hampering deliveries and adding to the supply headaches already being felt by some players.

“[Supply is] tight. Demand is pretty strong and there is just not enough [volume] for whoever is not fully covered,” a selling source said.

Several sources said they had received additional enquiries for volumes but they were unable to help out and take advantage of the increasing spot prices.

“We are balanced for January but we will try and see whether we can squeeze some tonnes out,” a selling source said.

Another seller source said “a lot of business for January was done at the end of December. I could do another 1,000 tonne lot, but then it’s the end of the story for me for January.”

A third seller said “we got plenty [of] requests for propylene and I would love to sell... but looking into my tank I can see the bottom.”

The January contract price was agreed at €1,130/tonne FD (free delivered) NWE on 20 December, up by €20/tonne.

Spot prices at the beginning of last month were in the mid to high €1,000s/tonne on a FD inland and CIF (cost, insurance, freight) coastal business, some 2-5% below the prevailing contract price.

This week, at least two spot deals were heard taking place at January contract price flat, and although neither of the deals have been fully confirmed by both counterparties, market sources are not surprised by the development.

A couple of sources said they even expected deals to be done at a premium to the contract price – a situation not seen since February of last year – but others are not so sure saying much will depend on demand levels going forward.

“Run rates are better than in December, but [it] remains to be seen whether this is sustainable,” a major consumer said.

Much of the demand has been attributed to re-stocking as inventories levels at the end of December were very low. However, some players said the strength of the enquiries being received for February deliveries suggested that the market expected the tightness in supply to persist for some time.

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By: Nel Weddle
+44 20 8652 3214

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