By Judith Wang
SINGAPORE (ICIS)--Spot propylene prices in Asia rose to a 20-month high this week on the back of strong crude and naphtha values, with further support coming from the firm downstream polypropylene (PP) demand, industry sources said on Friday.
Offers were heard at $1,500-1,505/tonne (€1,095-1,099/tonne) CFR (cost and freight) NE (northeast) Asia or above, while buying ideas were at $1,485-1,490/tonne CFR NE Asia this week, they said.
Tight supply in the key China market due to lower operating rates at some plants is also bolstering domestic prices of the material, market sources said.
First-half January shipment deals were heard done at $1,480-1,497/tonne CFR NE Asia during the week.
Similar price levels were last seen in April 2012, according to ICIS.
Most market participants attributed the price uptrend to the rising downstream PP prices, which is the key downstream user for propylene.
“If PP prices continue to increase, the propylene prices will also follow the trend,” a trader said.
Domestic PP yarn prices increased to yuan (CNY)12,050-12,400/tonne EXWH on 5 December from CNY11,800-11,950/tonne east China EXWH one month ago, because of the low inventory and price hike from major producers.
On the import side, PP yarn prices also jumped to $1,500-1,530/tonne CFR China in the week ended on 29 November, which is also the highest level within this year according to ICIS.
Some PP producers said they could make meagre profit at least recently, so they could pay higher number to take imported propylene.
Additionally, the high domestic propylene prices also increased the requirement for imported materials, sources said.
Domestic propylene prices closed at CNY10,950-11,050/tonne ex-tank Shandong on 5 December, which is roughly equivalent at $1,521-1,535/tonne CFR China, sources said.
“Domestic propylene is also not cheap, so we have to buy import cargoes. And the supply is also limited as some FCC crackers in east Shandong province were running at lower rates this year amid slowing consumption for petroleum products,” a local buyer said.
Meanwhile, the high naphtha prices close to $1,000/tonne CFR Japan and firm crude futures also buoyed the market sentiment.
Looking forward, the outlook was mixed.
Some market participants said that the propylene prices will increase further if PP prices continue to maintain the momentum, but others said price uptrend will be capped given the more supply from South Korea and Taiwan for January.
A major Taiwanese producer issued a tender yesterday to sell a few cargoes for January loading, according to the producer.
The supply from South Korea will also likely increase amid the upcoming shutdown at domestic major consumer Tongsuh Petrochemical’s No 3 acrylonitrile (ACN) in South Korea in the second half of December.
“It is too difficult to predict the propylene trend this year, we just buy on a need-to basis,” an end-user said.
($1 = €0.73 / $1 = CNY6.09)
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections