Updated to mid-August 2011
Spot supply of propylene oxide (PO) in Asia remained tight for the third quarter, as regional PO facilities were taken offline like dominoes for scheduled maintenance shutdowns.
Other key spot suppliers spent most of the quarter trying to resolve production issues and had limited availability, but demand from the downstream polyols industry was relatively healthy. Consequently, this drove up spot PO prices in Asia, despite a temporary dip in July.
However, market participants said the sharp PO rally is unsustainable, because there is limited pass-through to downstream prices. Also, higher priced PO allows ample room for a downward correction when regional PO plants resume normal rates of production, market participants said.
In addition, Dow Chemical’s new PO plant in Thailand is expected to start commercial sales in September/October 2011, which could further cool sentiment.
European propylene oxide (PO) contract prices fluctuated between May and August 2011, because of upstream price volatility. In May, PO prices rose by €28-38/tonne, taking values to €1,658-1,773/tonne FD (free delivered) NWE (northwest Europe).
Formula-related PO contracts increased by €28/tonne, in line with higher propylene feedstock costs. For freely negotiated PO business, larger hikes were frequently reported, amid strong demand and restricted supply from two main producers stemming from plant outages.
In June and July, PO contract prices were under downward pressure, driven by lower feedstock costs. For freely negotiated PO business, reductions were heard in June, because of ongoing healthy demand as well as residual market tightness, following recent plant turnarounds at two major producers. In July, for non-formula activity, rollovers were also heard from a few sellers, on the back of balanced-to-snug supply, but this was not widely confirmed.
In August, PO contracts are expected to decrease by around €12/tonne, in line with the formula pass-through level. For freely negotiated accounts, rollovers were expected as the market was fairly balanced. Any lull in demand over the summer was weighed against preparations for forthcoming plant outages.
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Propylene oxide (PO) is a highly reactive chemical used as an intermediate for the production of numerous commercial materials. The largest derivative of PO is polyether polyols, taking about 60-70% of PO demand. Polyether polyols are one of the main components used in the manufacture of polyurethanes (PUs), which are used in applications such as rigid foam installation and flexible foam seat cushions. World demand for polyols is growing about 5%/year.
More about Propylene oxide Uses and Outlook
Propylene oxide (PO) is made traditionally by chlorohydrin or epoxidation routes. In the older chlorohydrin process, propylene and chlorine react in the presence of water to form propylene chlorohydrin, which is further reacted with sodium or calcium hydroxide to obtain PO.
More about Propylene oxide Process Technologies
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