Polypropylene

China’s polypropylene (PP) import demand in the second quarter is expected to be capped by the recent start-up of new domestic capacities. ExxonMobil is expected to start up its new 450,000 tonne/year PP plant in Singapore in coming months, and there are concerns that the new supply could exert downward pressure on the southeast Asian markets.

PP demand in Europe is weak, but production is cut back heavily - for commercial reasons or because of propylene supply problems. However, only continued weakness in naphtha could significantly lower prices, as producers will continue to balance supply and demand.

PP prices in the Middle East and south Asia are expected to come under pressure in the second quarter as Middle East supply returns to normal levels, with several plants due to be restarted after completing scheduled maintenance. Buyers in India said they were likely to build up six to eight weeks’ worth of inventory should prices fall in the coming months.

Conditions are still uncertain for the PP market in Latin America, as market participants wait for the settlement of benchmark US propylene contracts. Prices in Mexico will emulate the propylene outcome to the penny, as they usually do.

In South America, prices may still go up in March, and start to taper off in April. Producers in that region have never reflected the total increase of feedstock propylene in their PP prices, so they feel like having more increases in March to improve margins.

Buyers everywhere will press for discounts. In places such as Venezuela and Argentina prices move only when there is authorization from the government, so they may not follow international patterns. Demand is good in South America, but a little subdued in Mexico and Central America.

Venezuela is in turmoil because of a recent currency devaluation, and with additional tensions after the death of president Hugo Chavez. The result of the elections in April could dramatically change things.

Updated to mid-February 2013