Tight supply supports China PP market amid weak C3 prices

(recasts reference to propylene in paragraph 6 for clarity)

SINGAPORE (ICIS)–Spot polypropylene (PP) prices in China are currently being shielded by tight domestic supply against slumping values of feedstock propylene (C3), industry sources said on Tuesday.

Crude-led gains in the PP futures market and a slight pick-up in demand were also supporting the prices of the polymer, they said.

On 12 October, PP flat yarn prices were assessed stable at $990-1,000/tonne CFR (cost and freight) China, while domestic prices of the polymer stood at yuan (CNY) 7,400-7,850/tonne, according to ICIS data.

But downward pressures on spot PP prices may heighten as sellers will have to meet their targets in a holiday-shortened month while buying sentiment is still generally weak, industry sources said.

The Chinese markets were closed for a full week from 1 October for the celebration of its National Day.

Feedstock propylene prices, on the other hand, have been slumping as Asia is awash with supply. At midday, propylene prices stood at $530-570/tonne CFR NE (northeast) Asia, according to ICIS.

Crude futures movement will also continue to exert influence on the PP market, industry sources said.

Last week, strong crude gains sent the domestic PP prices in China rising by CNY100/tonne to CNY7,500-8,100/tonne; and the January PP futures – the most actively traded contract on the Dalian Commodity Exchange (DCE) – surging 3.33% to close at CNY7,426/tonne on 9 October.

At noon, US crude was up 38 cents at $47.48/bbl, while Brent crude gained 50 cents to $50.36/bbl.

Orders for end-products were seasonally firm, lifting PP consumption ahead of the yearend holidays, market sources said.

Supply, on the other hand, is being curtailed by scheduled turnarounds at major domestic PP facilities in China.

These include Sinopec Zhanjiang Petrochemical’s 140,000 tonne/year PP plant, which was shut on 4 October and is expected to restart on 28 November.

Zhenhai Refining and Chemical Co’s (ZRCC) 300,000 tonne/year facility was also taken off line for maintenance on 9 October and is due to resume production on 18 October, while Luoyang Petrochemical’s 140,000 tonne/year unit has been shut since 30 September and will be down for two months.

Focus article by Lizzie Yu

($1 = CNY6.32)

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